AURORA RODRIGUEZ, ET AL., PLAINTIFFS AND APPELLEES, VS. CITY OF CABANATUAN, DEFENDANT AND APPELLANT.

Plaintiffs brought this action against defendant before the Court of
First Instance of Nueva Ecija seeking to declare Ordinance No. 12,
series of 1956, null and void on the ground that it impairs the
contract of lease entered into between them covering portions of land
facing the public market belonging to the City of Cabanatuan.

Defendant set up the defense that said ordinance does not have the
effect of impairing any contractual obligation because the contract of
lease mentioned in the complaint is null and void for having been
executed by the mayor in excess of his authority.

After trial, the court held that Ordinance No. 12, insofar as it
raises the rental of the portions of land covered by the contract of
lease entered into between the parties, has no binding; effect upon
said contract for it will be a violation of a contractual obligation.
It dismissed defendant’s counterclaim without pronouncement as to
costs. Defendant took the case to the Court of Appeals, but the
appellate court certified, the case to us on the ground that only
questions of law are involved.

Prior to January 4, 1950, Lot 1511 of the Cadastral Survey of
Cabanatuan belonging to the City of Cabanatuan was leased to several
persons. On said date, Aurora Rodriguez, et al., plaintiffs herein,
wrote a letter to the Municipal Council of Cabanatuan requesting that
the mayor be authorized to enter into a contract of lease with them
regarding portions of said lot which were already occupied by them for
a period of not exceeding 10 years with an option to renew for a like
period at the same rate per square meter they were then paying which
was F0.30 per square meter considering that the present month to month
lease they have leaves them no security of tenure, and “acting on this
request the municipal council approved Resolution No. 2 granting the
municipal mayor the requisite authority to enter into the contract in
accordance with the conditions stated in the petition provided that the
municipal council may, by ordinance, increase or decrease the rental
should conditions warrant said increase or decrease.

Pursuant to said resolution, the City of Cabanatuan entered into
separate contracts of lease with the plaintiffs covering different
portions of the lot wherein the lessees agreed to pay a rental at the
rate of P0.30 per square meter, per month. This was the rate which
plaintiffs paid until April, 1956, when the Municipal Board of
Cabanatuan City approved Ordinance No. 12 raising the rental from P0.01
per square meter a day to P0.03 per square meter a day. And considering
this ordinance violative of their contracts of lease, plaintiffs
instituted the present action.

In the contract of lease entered into between plaintiffs and
defendant, one of the stipulations agreed upon is as follows: “That the
rate of rental stipulated under paragraph 2 may be increased or
decreased should the Municipal Council find it advisable to effect such
increase or decrease and the party of the second part is willing to pay
such new rental as fixed by the Municipal Council on condition that any
decrease or increase in the rate of rental shall be within fifty (50%)
per cent of the present rate agreed upon.” It is appellee’s contention
that, in view of this limitation in the rate of rental that may be
decreased or increased, appellant cannot now impose a rate beyond the
limit fixed, otherwise it will be violative of’ the contract.
Appellant, on the other hand, contends that that limitation is
ineffective because it is in excess of the authority conferred upon the
mayor by Resolution No. 2 which provides that only the municipal
council may by ordinance increase or decrease such rental if conditions
should warrant, which conditions cannot be limited by the mayor. .

The trial court, however, did not find it necessary to pass upon the
question of whether the limitation which was acceded to by the former
mayor who signed the lease contract is or is not beyond his authority
because it entertained the opinion that regardless of such limitation
the important question to determine was whether the increase in the
rental in accordance with Ordinance No. 12 was warranted by the
conditions then prevailing at the time it was adopted by the Municipal
Board of Cabanatuan City. In this respect, the trial court made the
following interesting observation:

“Under Resolution No. 2 of Cabanatuan City, the Municipal Board may by ordinance increase or decrease the rental should “conditions warrant such increase or decrease.”
Under the terms of the resolution which had been accepted by the
lessees, the Municipal Council may increase or decrease the rental only
when the conditions warrant such increase or decrease. The resolution
does not reserve to the Municipal Board the absolute power to raise or
decrease the rental at its whim and caprice. The conditions must
warrant the increase. And it is but fair and reasonable that the
Municipal Council should not have the absolute power and authority to
increase the rental, for if it had, such reservation will be void for
it leaves the fulfillment of the contract to one party; and secondly,
to give that authority to the Municipal Board, assuming it to be valid
would subject the lessees to the mercies of the Municipal Board. ***

“To
repeat, the Municipal Council under Resolution 2 could increase or
decrease the rental during the period of the lease only when the
conditions warrant. The authority is dependent upon the fulfillment of
this condition. “What these conditions which would warrant the increase
or decrease of the rental are, do not appear from Resolution No. 2. But
it may he presumed that the conditions which should warrant the
increase of the rental would he the rise in the value of real property,
increased volume of business, and such other circumstances which, would
show that the lease has been profitable to the lessee. In raising the
rental to three times the rental agreed upon in. the contract of lease
in Section 2 of Ordinance No. 12, Municipal Board had acted
arbitrarily. Nothing in Ordinance No. 12 appears to show that the
conditions warrant the raising of the rental as authorized in
Resolution No. 2, and no evidence had been presented by the defendant
that the condition warranted such increase of the rental from P0.01 per
square meter a day to P0.03 per square meter a day, or three times the
rental agreed upon. On the contrary, it is admitted that the lot of
Samahang Magsasaka which is adjacent to Lot 1511 of the defendant City
of Cabanatuan charges the same rate of P0.01 per square meter a day as
is now charged to the present lessees by the defendant City of
Cabanatuan. It is true that the City of Cabanatuan. charges a rental of
P0.05 per square meter a day on the market lots which ‘is on the
opposite side of the street. But this alone does not prove that the
conditions warrant the raising of the rental on Lot 1511. Conditions in
the market site are different from conditions existing on the lot in
question even if they are on the same street. A market is a place where
people converge especially during market hours. People who go to the
market would not take the trouble of crossing the street and making
their purchases on the other side. What they can purchase in the market
site they would purchase there. And moreover, the right or authority of
the defendant to charge a rental on the market site is different from
its authority to raise the rental under the contract of lease entered
into “by the plaintiffs. The authority of the defendant to raise the
rental is subject to the limitation that the condition should warrant
the raise. The burden is upon the defendant to prove that the
conditions warrant such a raise. This it had not done. On the contrary,
if one is to judge from the rental charged by the Samahang Magsasaka,
the conditions did not warrant the raising of the rental.”

We have nothing to add to the foregoing observation of the trial
court which we find warranted by the circumstances surrounding the
contract of lease entered into between the parties. Indeed, even if we
give emphasis to Resolution No. 2 which served as the basis of the
authority exercised by the Mayor of Cabanatuan in entering into said
contract as appellant wants to have it, we would find that the increase
in the rental embodied in Ordinance No. 12 would still appear arbitrary
for, as the trial court said, defendant has not adduced any proof
justifying the increase of the rental by 300%. Note that said
resolution expressly provides that the municipal council may authorize
the increase only when existing conditions would warrant. The
exercise of such authority is therefore predicated upon a condition
which in this case was not complied with. This being a matter which is
evidentiary in character, we are not now justified in disturbing the
appreciation of the situation made by the trial court for failure of
appellant to adduce the necessary evidence. We are therefore persuaded
to affirm, as we hereby, do, the decision of the trial court.

Wherefore, the decision is hereby affirmed, without pronouncement as to costs.

Paras, C. J., Bengzon, Montemayor, Labrador, Concepcion, Reyes, J. B. L., Endencia, Barrera, and Gutierrez David, JJ., concur.