VIRGINIA OCAMPO JUAREZ, PETITIONER, VS. THE HON. COURT OF APPEALS AND CETUS DEVELOPMENT, INC., RESPONDENTS.

The subject of this controversy is a lot located at 502 Quezon Boulevard,
Manila. It was leased in the early
1900’s to Servillano Ocampo, who built a house thereon where he lived with his
parents and his sister Angela. He died
on March 17, 1956. The lease was taken
over by Angela Ocampo, who continued to stay in the house together with her
children, including herein petitioner Virginia Ocampo Juarez. In 1976, because of her advanced age, Angela
moved to her daughter Virginia’s house in Pasay City. The house on Quezon Boulevard she leased to Roberto Capuchino,
reserving only one room for her personal belongings.

Meantime, the lot had been sold by the Aranetas to Susanna
Realty, Inc., which in turn sold it in 1985 to Cetus Development Corporation,
the herein private respondent.

Immediately after acquiring the lot, Cetus filed a complaint for
ejectment against the petitioner with the Municipal Court of Manila on the
ground that the lessee had subleased the property without its consent in
violation of BP 877. The case was
dismissed.^[1]
The court held that the statute was inapplicable because the sublease was made
prior to its effectivity.

The decision was affirmed on appeal to the Regional Trial Court
of Manila. That court added that the
law was applicable only where the lessor had constructed the building located
on the lot and not where it was constructed by the lessee himself. It also held that the real party in interest
was not the petitioner but Angela Ocampo Juarez.^[2]

The Court of Appeals reversed.^[3] It
ruled that BP 877 was applicable because the original contract of lease did not
specify a fixed term and payment of the rental was made on a monthly
basis. The contract was deemed terminated from month to month. Hence, when it was renewed in July 1985, it
became subject to BP 877, which had come into effect on June 12, 1985.

The respondent court further held that the law covered the
subject property under the definition of residential unit therein as referring
to:

Section 2. Definition of terms –

(b) x x x an
apartment, house and/or land on which another’s dwelling is located used for
residential purposes and shall include not only buildings, parts or units
thereof used solely as dwelling places, except motels, motel rooms, hotels,
hotel rooms, boarding houses, dormitories, rooms and bedspaces offered for rent
by their owners, x x x.

Furthermore, the statute provided the following ground for the
ejectment of the tenant:

Sec. 5. Grounds for Judicial Ejectment. – Ejectment shall be
allowed on the following grounds:

(a) Assignment of
lease or subleasing of residential units in whole or in part, including the
acceptance of boarders or
bedspacers, without the written content of the owner/lessor.

Finally, Virginia Ocampo Juarez was a proper party defendant in
the ejectment case because she was the one actually paying the rentals to the plaintiff
at the time the complaint was filed.

The respondent court is now faulted in this petition for review
on certiorari. The
petitioner again contends that BP 877 should not be given retroactive
application because it would violate the impairment clause and the prohibition
against ex post facto laws. She repeats that she is not the proper party defendant but her
mother Angela, who inherited the leasehold right from her brother Servillano,
the original lessee of the lot.

We rule for the respondents.

Article 1687 of the Civil Code provides:

If the period for the lease has not been fixed, it is understood to
be from year to year, if the
rent agreed upon is annual; from
month to month, if it is monthly;
from week to week, if the rent is weekly; and from day to day, if the rent is
to be paid daily. However, even though
a monthly rent is paid, and no period for the lease has been set, the courts
may fix a longer term for the lease after the lessee has occupied the premises
for over one year. If the rent is weekly,
the courts may likewise determine a longer period after the lessee has been in
possession for over six months. In case
of daily rent, the courts may also fix a longer period after the lessee has
stayed in the place for over one month. (1581a)

As the original contract of lease did not prescribe a fixed
period and the rentals were paid monthly, the same should be considered
renewable from month to month, following the above-quoted provision. The same observations are made of the
contract of sublease in favor of Capuchino, which began in 1976 and has
continued to date. Like the principal
contract, the sublease was also terminable at the end of each month because no
specific period had been prescribed and the rentals were also payable monthly.

The petitioner insists that the sublease was not prohibited when
it was concluded in 1976 and suggests that since it was valid at that time, it should continue to be valid even
now.

Thus, Article 1650 of the Civil Code provides as follows:

When in the contract of lease of things there is no express
prohibition, the lessee may sublet the thing leased, in whole or in part,
without prejudice to his responsibility for the performance of the contract
toward the lessor.

She forgets, however, that
when the sublease was renewed in July 1985, it had become invalid under
the provisions of BP 877, which had already become effective. The law was operating prospectively
upon the new, or renewed, contract of sublease which now could no longer be
considered valid without the written consent of the lessor.

But even if the sublease were not terminable when the statute
became effective on June 12, 1985, and had a fixed period going beyond that
date, that period could still be cut short by operation of BP 877. This time the law would operate retroactively,
to affect existing contracts of sub-lease concluded before the law came
into effect.

Thus, BP 877 provides as follows:

All residential units the total monthly rental of which does not
exceed four hundred eighty pesos (P480.00) as of the effectivity of this Act
shall be covered by this Act.

x x x

The petitioner complains that the retroactive application of the
law would violate the impairment clause. The argument does not impress. The impairment clause is now no longer
inviolate; in fact, there are many who now believe it is an anachronism in the
present-day society. It was quite
useful before in protecting the
integrity of private agreements from government meddling, but that was when
such agreements did not affect the community in general. They were
indeed purely private agreements then. Any interference with
them at that time was really an unwarranted intrusion that could be properly
struck down.

But things are different now. More and more, the interests of the public have become involved in what
are supposed to be still private agreements, which have as a result been
removed from the protection of the impairment clause. These agreements have come within the embrace of the police
power, that obtrusive protector of the public interest. It is a ubiquitous policeman indeed. As long
as the contract affects the public welfare one way or another so as to
require the interference of the State, then must the police power be asserted,
and prevail, over the impairment clause.

As we held in Philippine Veterans Bank Employees Union vs.
Philippine Veterans Bank:^[4]

Even if it be conceded that the charter of the Bank constitutes a
contract between the Government and the stockholders of the Bank, it would not
follow that the relationship cannot be altered without violating the impairment
clause. This is a too simplistic
conclusion that loses sight of the vulnerability of this “precious little
clause,” as it is called, to the inherent powers of the State when the
public interest demands their exercise. The clause, according to Corwin, “is lately of negligible
importance, and might well be stricken from the Constitution. For most practical purposes, in fact, it has
been.”

The undeniable fact is that the notion of public interest has made
such considerable inroads into the constitutional guaranty that one could
validly say now that it has become the exception rather than the rule. The impact of the modern society upon
hitherto private agreements has left the clause in a shambles, as it were, making practically every contract
susceptible to change on behalf of the public. The modern understanding is that the contract is protected by the
guaranty only if it does not affect public interest, but there is hardly any
contract now that does not somehow or other affect public interest as not to
come under the powers of the State. Part of that understanding therefore is that, conversely, the contract
may be altered validly if it involves the public interest, to which private
interests must yield “as a postulate of the existing social order.”

And so it must be in the case at bar. Housing is one of the most serious social problems of the
country. The regulation of rentals,
especially in the urban areas, has long been the continuing concern of the
government, as manifested by the succession of laws on the subject, beginning
with Rep. Act No. 6359, the original House Rentals Law. This Court has consistently recognized the
need for such legislation, to prevent the lessor from imposing arbitrary
conditions on the lessee while at the same time deterring the lessee from
abusing the statutory benefits accorded to him.

Thus, the lessor is prohibited from arbitrarily increasing the
rentals and leaving the lessee no choice except to pay up or vacate the leased
premises for the shelterless streets. On the other hand, the lessee is not permitted to insist on paying
inordinately low rentals grown absurd and unrealistic in view of rising costs,
including the expenses of administering and maintaining the leased premises.

In allowing the ejectment of the lessee who
has subleased the leased premises without the written consent of the lessor,
the law has taken note of one of the unconscionable practices of lessees that
have caused much prejudice to the lessor. The subject lease is a case in point. It is not denied that the rental on the lot is only P69.70 per
month. On the other hand, the
petitioner has declared that she charges Capuchino a monthly rental of P400.00 under the sublease contract,
or almost ten times her own rental. While it is true that this covers both the lot and the building, the
point is that she is not paying the lessor enough for the use of the lot in
light of the total rental she is charging Capuchino for the use of the house and
lot.

The Court is not unaware of the many gambits employed by
landlords to eject their incumbent tenants whose rentals may not be increased
beyond the statutory maximum and who may even enjoy the right to purchase the
rented premises under certain conditions. Thus, lessors may pretend to need the
premises themselves or to have to undertake urgent repairs thereon or to not
have received the rentals on time when their real purpose is to lease the
property to new tenants at higher rentals
not covered by the rental laws.

On the other hand, there are lessees who have taken undue
advantage of the rental laws by holding on to the leased premises although they
no longer need them for their own residence or administering them to the
prejudice of the landlord by partitioning the apartment or lot and subleasing
them to separate families or individuals, or accepting bedspacers and boarders,
each paying rentals that in the aggregate are much more than the regulated
rentals the original lessee is paying the landlord.

The purpose of the law in interfering with such contracts is to
protect both the landlord and the tenant from their mutual impositions that can
only cause detriment to society as a whole. The practices above discussed have to be the subject of government
regulation and even prohibition and cannot seek legitimate refuge in the
impairment clause.

The petitioner’s
contention that BP 877 is an ex post facto law must also
be rejected. It is not penal in nature
and the mere fact that it contains penal provisions does not make it so. At any rate, she is not being prosecuted
under the said penal provisions. She
was sued in the municipal court in a civil
complaint to eject her from the lot on the ground that she had unlawfully
subleased it.

The petitioner’s final contention is that she is not the proper
party defendant in the ejectment case but her mother Angela, who inherited the
leasehold right from Servillano Ocampo. That claim is also unacceptable. It is obvious that the petitioner has been acting on behalf of her
mother, who is now 92 years of age and living in her care. Angela cannot administer the subleased lot
and house, let alone appear in court to resist her ejectment. It is the petitioner who has been receiving
the rent from Capuchino and in turn paying the rent on the lot to the private
respondent. For all intents and
purposes, she has taken over the leasehold right inherited by Angela and it is
only proper that she be held responsible for the unauthorized sublease of the
lot. In effect, it is the petitioner
who is in legal possession of the leased lot and as such is the proper party
defendant in a complaint for ejectment.

Thus, under Section 1, Rule 70, of the Rules of Court:

Who may institute proceedings, and when. – Subject to the provisions
of the next succeeding section, a person deprived of the possession of any land
or building by force, intimidation, threat, strategy, or stealth, or a
landlord, vendor, vendee, or other person against whom the possession of any
land or building is unlawfully withheld after the expiration or termination of
the right to hold possession, by virtue of any contract, express or implied, or
the legal representatives or assigns of any such, landlord, vendor, vendee, or
other person may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper
inferior court against the person or persons unlawfully withholding or
depriving of possession, or any person or persons claiming under them, for the
restitution of such possession, together with damages and costs. The complaint must be verified.

In any event, the non-joinder of Angela was not fatal to the
complaint for ejectment because it is provided in Section 11, Rule 3, that:

Misjoinder and non-joinder of parties. – Misjoinder of parties is
not ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any
party or on its own initiative at any stage of the action and on such terms as
are just. Any claim against a party may
be severed and proceeded with separately.

If the petitioner must still quibble about the non-inclusion of
Angela, there is nothing to prevent this Court now from ordering her inclusion
as party defendant and from considering her duly heard in her defense, through
her daughter, the herein petitioner, who has been acting in her behalf
throughout these proceedings. If that
be the petitioner’s insistence, then the order to that effect is hereby made.

The circumstances of this case show that the petitioner can no
longer retain the leased lot, not because she
does not need it anymore but, worse, because she is making a profitable
business of subleasing it without the written consent of the landlord, who is
entitled to recover the lot because of the violation of the lease. The petitioner cannot claim a denial of
social justice because she was not entitled to it in the first place.

WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.

Griño-Aquino, Medialdea, and
Bellosillo, JJ., concur.

Padilla, J., on leave.

^[1]
By Judge Ernesto A. Reyes.

^[2]
Penned by Judge Maximo A. Savellano, Jr.

^[3]
Penned by Justice Ricardo L. Pronove, Jr. with Benipayo and Guingona,
concurring.

^[4]
189 SCRA 14.