SPOUSES NAZARIO P. PENAS, JR. REPRESENTED BY ELPIDIO R. VIERNES, ATTORNEY-IN-FACT, PETITIONERS, VS. COURT OF APPEALS AND LUPO CALAYCAY, RESPONDENTS.

The only issue to be resolved in this ejectment case is whether
or not the Metropolitan Trial Court had jurisdiction over the complaint filed
by herein petitioner-spouses represented by their attorney-in­-fact Elpidio R.
Viernes.

The undisputed facts of the case as summed up by the trial court and adopted by respondent Court
of Appeals are as follows:

“Subject of this controversy [are the] premises identified as
24-B Scout Santiago Street, Barangay Laging Handa, Quezon City, also identified
as 26-B [South] D Street, Quezon City. It was the object of a written lease contract executed by the late
Nazario Penas in favor of [private respondent] Lupo Calaycay on June 26, 1964,
at an agreed monthly rental of One Hundred Ten (P110.00) Pesos, Philippine
Currency. The written lease contract
was on a month to month basis. Nazario
Penas, Sr. died on February 5, 1976 and, thereafter, on June 15, 1976, an extra­judicial
settlement of his estate was executed by his surviving heirs, one of whom is
his son, Nazario Penas, Jr. Likewise,
after the death of plaintiff’s mother Concepcion P. Penas on March 2, 1985, her
children including [petitioner] Nazario Penas, Jr. executed an extra judicial
settlement of her estate. As time
[went] on, the monthly rental on the subject premises had been gradually
increased by the [petitioners], the latest of which was Six Hundred Ninety One
and 20/100 (P691.20) Pesos, Philippine Currency.

In a letter of January 18, 1990, [petitioner]-spouses Penas,
through counsel notified the [private respondent] that effective March 1990,
they were terminating the written month to month lease contract as they were no
longer interested to renew the same and demanded from the latter to vacate the
premises in question on or before February 28, 1990. In the same letter, [petitioners] opted to allow the defendant to
continue occupying the leased premises provided he will agree to execute a new
lease contract for a period of one (1) year at an increased monthly rental of
Two Thousand Five Hundred Pesos (P2,500.00) Pesos, Philippine Currency, plus
two (2) months deposit and, further, gave the [private respondent] up to
February 28, 1990 to decide, otherwise judicial action for unlawful detainer
against the [private respondent] shall ensue. [Petitioners] later finally reduced the monthly rental to Two Thousand
(P2,000.00) Pesos, Philippine Currency, only.

[Private respondent] failed to abide by the demand of the
[petitioners]. However, he continued
staying on the leased premises and effective March 1990, he deposited the
monthly rentals in the subject premises with the PNB in his name ITF (in trust for) spouses Lucila and Nazario
Penas, Jr. under Account No. 688930. Prior to such deposit, [private respondent] together with others, in a
letter of March 26, 1990, informed the [petitioners], inter alia, that since [petitioners’] representative refused to accept the
rentals, he will deposit the same with a reputable bank and he will [hold] the
same intact for the [petitioners]. There was no instance that [petitioners] manifested any desire to
withdraw the same deposit in the bank.

On August 10, 1992, plaintiffs through counsel sent another letter
to the defendant to vacate the subject premises and to pay back rental
arrearages in the sum of Two Thousand (P2,000.00) Pesos, Philippine Currency,
per month from March 1990 in the total sum of Sixty Thousand (P60,000.00)
Pesos, Philippine Currency, which defendant failed to satisfy.

Accordingly, on September 25, 1992, after the corresponding
Certification to File Action was issued by Barangay Laging Handa, Quezon City,
[petitioners] filed the present suit for unlawful detainer on the grounds of
termination of the month to month lease contract and failure of the defendant
to execute a new lease agreement with increased rentals. [Petitioners] tried to impress the Court
that after they [had] agreed [to] a new monthly rental of Two Thousand
(P2,000.00) Pesos, Philippine Currency, [private respondent] refused to enter
into a new contract and insisted in paying at a lower rate; that they gave
defendant allowance of more than one (1) year within which to sign a new
contract of lease but still he refused to do so; that even if conciliation
before the barangay is unnecessary as [petitioners] reside abroad, their
attorney-in-fact referred the case to the barangay level.” (reference to
Annexes omitted)^[1]

The parties were required to submit their respective position
papers after which the Metropolitan Trial Court, Branch 33 of Quezon City
rendered a decision dated 16 March 1993 dismissing herein petitioners’
complaint for lack of jurisdiction. The
trial court based its decision on the finding that the complaint was filed more
than one (1) year after private respondent began unlawfully occupying the premises.

On appeal to the Regional Trial Court, the trial court decision
was upheld, the RTC ruling that herein petitioners’ remedy was converted from
an actio de mero hecho to an accion publiciana since more than one (1) year had elapsed
from the demand upon defendants to vacate. The Regional Trial Court concluded that herein petitioners could
initiate a proper complaint with the Regional Trial Court.

Respondent Court of Appeals in a decision*
in CA G.R. SP No. 31480 dated 19 November 1993 upheld the RTC. The Court of Appeals ruled that since herein
petitioners were not collecting the rentals being deposited by private
respondent, there no longer was any
lease contract between the parties for two (2) years since the first letter of
petitioners to private respondent. The
Court of Appeals thus agreed that the proper remedy of petitioners is to file
an action for recovery of possession in the Regional Trial Court.

We do not agree with the decision of the Court of Appeals, and
hence set it aside.

Petitioners correctly cite our ruling in Sy Oh v.
Garcia^[2]
upholding the established rule that the one (1) year period provided for in
section 1, Rule 70 of the Rules of Court within which a complaint for unlawful
detainer can be filed should be counted from the LAST letter
of demand to vacate, the reason being that the lessor has the right to waive
his right of action based on previous demands and let the lessee remain
meanwhile in the premises.^[3]

In the present case, it is of note that the first demand letter
addressed by petitioners to private respondent gave the latter the option to
either vacate the premises on or before 28 February 1990 or agree to execute a
new lease contract for one (1) year at an increased rental rate of P2,500 per
month. In Vda. de Murga
v. Chan^[4] we
held that:

“The notice giving the lessee the alternative either to pay the increased rental or otherwise
vacate the land is not the demand contemplated by the Rules of Court in
unlawful detainer cases. When after
such notice, the lessee elects to stay, he thereby merely assumes the new rental
and cannot be ejected until he defaults in said obligation and necessary demand
is first made.”

The facts of this case do not warrant a departure from said
settled doctrine. It should be noted
that even if the private respondent was depositing rentals in trust for the
petitioners, what was being deposited were rentals at the old rate, which
petitioners were not bound to accept or withdraw. When private respondent elected to remain in the premises after
petitioners had sent him the letter of 18 January 1990 giving him the option to
vacate by 28 February 1990 or to sign a new lease contract for one (1) year at
an increased rental rate of P2,500.00 (later reduced to P2,000.00) a month, he assumed the new rental rate and could be
ejected from the premises only upon default and by a proper demand from the
petitioners. The demand was made on 10
August 1992, followed by the action for unlawful detainer on 25 September 1992.

WHEREFORE, based on the foregoing, the decision of the
Court of Appeals in CA G.R. SP No. 31480 is hereby SET ASIDE and a new decision
rendered:

1. Ordering private respondent Lupo Calaycay to immediately vacate
the premises located at 24-B Scout Santiago Street, Barangay Laging Handa,
Quezon City.

2. Ordering private respondent Lupo Calaycay to pay back rentals
in the amount of Two Thousand (P2,000.00) Pesos per month from March 1990 until
he finally vacates the leased premises.

3. Ordering private respondent to pay Ten Thousand (P10,000.00)
Pesos as attorney’s fees.

Costs against private respondent.

SO ORDERED.

Narvasa, C.J., (Chairman), Regalado, and Puno, JJ., concur.

Mendoza, J., no part.

^[1]
Rollo, pp. 29-32.

*
Penned by Justice Lourdes K. Tayao-Jaguros with Justices Vicente V. Mendoza and
Jesus M. Elbinias concurring.

^[2]
G.R. No. L-29328, 30 June 1969, 28 SCRA 735.

^[3]
Racaza v. Susana Realty, Inc., G.R. No. L-20330, 22 December 1966, 18
SCRA 1172.

^[4]
G.R. No. L – 24680, 7 October 1968, 25 SCRA 441.