G.R. No. 178317, 23 September 2015, 771 SCRA 306


Respondent entered into a Lease Contract over a portion of Lot No. 7728 with petitioners as “lessees.” The latter bound themselves to construct a commercial building worth P143,823 on the leased lot. As per contract, instead of paying the rent in the form of money, petitioners would withhold such payment and apply the accumulated rent to the cost of the building they built on the leased property.

However, the building subject of the lease contract was burned down. Because of the destruction of the building, respondent sent a letter to petitioners demanding the accumulated rentals for the leased property from March 17, 1989 to June 17, 1992 totaling P78,000.00. As the demand was left unheeded, respondent filed a complaint for collection of rentals plus damages before the Molave RTC.


Are the petitioners are liable to pay respondents for back rentals?


This Court finds no reason to depart from the ruling of the courts a quo that petitioners should pay respondent for back rentals. There is no dispute that the contract entered into by the parties is one of lease. True, it had some modifications such that instead of paying the rent in the form of money, petitioners will withhold such payment and will apply the accumulated rent to the cost of the building they built on the leased property.

Thereafter, at the end of the lease period or until such time the cost of the building has been fully covered by the rent accumulated, petitioners, as lessees will transfer the ownership of said building to respondent. Unfortunately, the subject building was gutted down by fire. However, the destruction of the building should not in any way be made a basis to exempt petitioners from paying rent for the period they made use of the leased property. Otherwise, this will be a clear case of unjust enrichment.

In the instant case, there is no dispute that petitioners used the property for several years for their own benefit having operated a restaurant thereon. Therefore, it would be the height of injustice to deprive respondent of compensation due him on the use of his property by petitioners. The fact that the parties agreed to a different mode of payment – in this case, a building – does not in any way exempt petitioners from paying compensation due to respondent for the use of the latter’s property because the building was destroyed.

Petitioners should only be liable for rent during the period within which they were in possession of the leased property. Respondent himself testified that petitioner Ricardo stayed in the building on the leased premises just before it was burned down. There was no evidence submitted to prove that petitioners were in possession of the leased property after the fire.

Therefore, petitioners should be made to pay rent until that time only. To order petitioners to pay for back rentals equivalent to the cost of the building is in the same way, unjust enrichment this time on the part of respondent considering that the rent due for the period petitioners occupied the leased premises is way below the cost of the building.

*Case digest by Meriam Rika R. Wong, JD – 4, Andres Bonifacio College, SY 2019-2020