MERCEDES P. GUASCH, PETITIONER, VS. HON. COURT OF APPEALS AND ATTY. ARTURO L. RODRIGUEZ, RESPONDENTS.

This is a petition for review of the decision dated August 28, 1981 of the Court of
Appeals in CA-­G.R. No. 66145-R, entitled “Arturo L. Rodriguez vs.
Mercedes Guasch,” affirming the decision of the
Court of First Instance of Rizal, which ordered the
petitioner to vacate the private respondent’s property but set aside the order
for reimbursement of the petitioner’s insurance premiums and expenses for
repairs of the building.

The private respondent, Arturo L. Rodriguez, owned a building
which stood on his 1,277-square-meter land on Samson
Road, Caloocan
City.

On May 27, 1968,
the petitioner leased Rodriguez’s land and building for a nominal monthly
rental under a contract entitled “Lease of Land” (Exh.
A) wherein the petitioner bound herself to build
within three (3) years from the date of the contract, a new building on the land
which would become the property of the lessor, after
the expiration of twenty (20) years from the date of their agreement, without
any obligation to reimburse the lessee therefor.  The pertinent provisions of the contract read
as follows:

“3.  That notwithstanding the existing building,
the LESSEE may have same demolished and constructed in lieu thereof a new
two-storey concrete reinforced building worth not less than P200,000 as shown
by the plan, photostat copy marked as Annex ‘A’ and
specifications of materials marked as Annex ‘B’ and made an integral part
hereof;

“4.  That the said building be constructed in
accordance with the government rules and regulations with no less than one
first class toilet and bath on the second floor and on the ground floor one of
first class toilet and bath and another of the second class and made strictly
in accordance with the specification stated therein;

“5.  This building shall be finished not later
than three (3) years from date hereof and the LESSOR or his legal representative
may from time to time check on the construction and any deviation from the plan
and specification that may be found shall be changed and so made strictly in
pursuance to (sic) the agreement herein.” (Emphasis
supplied; Record on Appeal, pp. 8-9; pp. 33-34, Rollo.)

They also agreed that the new building would be insured at the
lessee’s expense for the benefit of the lessor:

“9.  The building shall be insured by the
LESSEE at her expense for P50,000 and in case of damage or fire the proceeds
shall be payable to the LESSOR herein and in which amount will
be expended for the repair of the damaged building.  The insurance Company underwriting must be
acceptable to the LESSEE herein.” (Underlining ours;
Record on Appeal, pp. 9-10.)

The parties further agreed that failure of the lessee to pay
three successive monthly rentals, or any violation of the lease covenants, would be a ground for the cancellation of the
lease, in which event, the building and all the improvements introduced by the
lessee would be forfeited to the lessor without
payment of indemnity to the lessee.

The lessee failed to comply with her obligation to construct a
new two-storey reinforced concrete building in accordance with the plan (Ex.
A-1).  What she built were three (3)
cheap accessoria-type tenements of wood and stone
worth only P50,000, and completely different from the
approved plans and specifications. 
Moreover, although she did insure the building, the beneficiary of the
policies was herself or the “Mercedes Commercial Enterprises and
Automotive Services,” (p. 74, Record on Appeal) instead of the lessor.  Rodriguez’s
demands for the delivery of the fire insurance policies to him were ignored by
her.  On February 1, 1977, the lessor
advised her in writing of the termination of the lease (Exh.
D).

On February 22, 1977,
Rodriguez filed a complaint for rescission of the lease contract and to recover
possession of the leased premises, with damages in the Court of First Instance
of Rizal.

Petitioner filed a motion to dismiss the action, arguing that the
Court of First Instance did not have jurisdiction over the case, as it was
essentially one for ejectment, hence, cognizable by
an inferior court.  After her motion to
dismiss was denied, she filed an answer denying that she had violated any
conditions of the lease.

On October 8, 1979, the trial court rendered a decision finding
that the petitioner (then the defendant) violated two conditions of the lease,
namely:  (1) her obligation to construct
a new two-storey reinforced concrete building in accordance with the plan (Exh. A-1); and, (2) her obligation to
procure insurance for the benefit of the lessor,
plaintiff Rodriguez.  The court
declared the plaintiff entitled to cancel the lease contract.

The dispositive portion of the decision
reads:

“WHEREFORE, judgment is hereby rendered declaring the lease
contract entered into by the parties on May 27, 1978 (sic) terminated and
cancelled as of February 1, 1977 and all improvements constructed and existing
on the leased premises are hereby declared as belonging to the plaintiff from the aforementioned
date.  Defendant is directed to
immediately deliver the possession of these improvements to the possession of
the plaintiff.  She is further required
to deliver immediately to the plaintiff all the rentals she received
corresponding for the period from February 1, 1977 up to actual delivery less
all rentals she paid to plaintiff for the land, as well as all expenses
[incurred] by her for the procurement of the insurance coverage and for the repair
of the buildings from February 1, 1977 up to the present.  Defendant is furthermore condemned to pay
plaintiff the amount of P1,000 as attorney’s fees and
P1,000 as liquidated damages.  The
counterclaim is dismissed.  Costs in this instance against defendant.” (p. 10, Rollo.)

Both parties appealed, the lessor’s
appeal being limited only to the portion of the judgment ordering him to
reimburse the lessee for the insurance premium paid and for repairs made on the
building after February 1, 1977.

On August 28, 1981,
the Court of Appeals rendered a decision, the dispositive
portion of which reads:

“WHEREFORE, the decision appealed from is hereby modified
in the sense that plaintiff-appellant should not be required to reimburse
defendant-appellant’s expenses incurred by the latter for the procurement of
the insurance coverage and for the repair of the building from February 1, 1977. 
In all other
respects, the decision appealed from is hereby affirmed, with costs against
defendant-appellant.” (p. 48, Rollo.)

After her motion for reconsideration of the decision was denied
by the Appellate Court in a Resolution dated December 2, 1981, Guasch filed
this petition for review wherein she assigned eight (8) errors against the
Appellate Court.  However, the resolution
of those alleged errors hinge upon the lone factual issue of whether or not she
violated the conditions of the lease agreement.

The Appellate Court’s finding that she did is supported by the
evidence, and its conclusion that her lessor was
entitled to rescind the lease contract with damages is in accord with
applicable laws and jurisprudence.

Article 1191 of the Civil Code provides that “the injured
party may choose between the fulfillment and rescission of the obligation, with payment of damages in
either case.  He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.” The rescission of the contract as sought by the private
respondent is therefore legally justified (Siy vs.
Court of Appeals, 138 SCRA 536; Ayson-Simon vs. Adamos, 131 SCRA 439).

The court of first instance, now the regional trial court, had
jurisdiction over the complaint for rescission of the lease contract and, for a
judicial declaration that as of February
1, 1977, when the contract was terminated, the plaintiff (lessor) became the owner of the building constructed by the
defendant on the leased premises.  The
complaint neither alleged forcible entry by the defendant upon the premises nor
illegal detainer of the same, for as pointed out by
the Court of Appeals, Rodriguez was not yet the owner of the building occupied
by the petitioner.  Hence, the action did
not come within the jurisdiction of an inferior court.  Courts of first instance (now regional trial
courts) have original jurisdiction in civil actions involving the title to or
possession of real property or any interest therein except actions for forcible
entry and unlawful detainer (Sec. 44[b], Judiciary
Law and Sec. 19[2] of Batas Pambansa Blg. 129).

WHEREFORE, the petition for review is denied for lack of
merit.  The appealed judgment is affirmed
in toto, with costs against the
petitioner.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Medialdea, JJ., concur.