Not entitled to suspend payment after termination of lease

The lessor leased the property to spouses-lessees with the understanding that the latter would eventually purchase the property. Accordingly, the lessees paid rent. The time came, however, when the lessor wanted to proceed with the lessees’ purchase of the property. The lessees were unable to do so.

Because of this, the lessor terminated the lease, as it was just an arrangement while the sale had not yet been consummated. The lessor then required the lessees to vacate the property. The lessees refused. Because of this, the lessor cut off the electricity in the leased premises. The lessees, still refusing to leave, purchased a generator so they could continually occupy and use the leased premises.

Eventually, the lessor filed for ejectment. The lessees later vacated the property, leaving the trial court to determine only the amount of rent they had to pay. The lower court ruled in favor of the lessees, opining that they had the right to suspend payment of rent.

On appeal, however, the regional trial court ruled against the lessees, decreeing that they were not entitled to suspend rent payment. The Court of Appeals then found for the lessees, justifying their suspension. This prompted the lessor to seek relief from the Supreme Court.

The lessees invoked their right to suspend payment of rent under Article 1658 of the Civil Code, which allows the lessee to suspend payment if the lessor fails to make them have peaceful and adequate enjoyment of the leased property. The act of disconnecting the power in the premises, they argued, fell under that circumstance, thus warranting their withholding of payment.

The Supreme Court, however, ruled in favor of the lessor, stating:

“In this case, the disconnection of electrical service over the leased premises on 14 May 2004 was not just an act of physical disturbance but one that was meant to remove respondents from the leased premises and disturb their legal possession as lessees. Ordinarily, this would have entitled respondents to invoke the right accorded by Article 1658 of the Civil Code. However, this rule will not apply in the present case because the lease had already expired when petitioner requested for the temporary disconnection of electrical service.

“Petitioner demanded that respondents vacate the premises by 30 May 2004. Instead of surrendering the premises to petitioner, respondents unlawfully withheld possession of the property. Respondents continued to stay in the premises until they moved to their new residence on 26 September 2004. At that point, petitioner was no longer obligated to maintain respondents in the ‘peaceful and adequate enjoyment of the lease for the entire duration of the contract.’

“Therefore, respondents cannot use the disconnection of electrical service as a justification to suspend the payment of rent. Assuming that respondents were entitled to invoke their right under Article 1658 of the Civil Code, this does not exonerate them from their obligation under Article 1657 of the Civil Code ‘to pay the price of the lease according to the terms stipulated.’

“Lessees who exercise their right under Article 1658 of the Civil Code are not freed from the obligations imposed by law or contract. Moreover, respondents’ obligation to pay rent was not extinguished when they transferred to their new residence. Respondents are liable for a reasonable amount of rent for the use and continued occupation of the property upon the expiration of the lease. To hold otherwise would unjustly enrich respondents at petitioner’s expense.”

As clearly shown and discussed above, while the lessor may have done something most inconvenient to her lessees, that could not be considered a breach under Article 1658 since the lease was already terminated. Accordingly, there was actually no leased premises to be enjoyed peacefully by the lessees to speak of.

Moreover, lessees should be aware, as stated by the Supreme Court, that Article 1658 merely justifies the suspension of payment and not exemption from it. Those are two different worlds, where the former still necessitates payment of liability.

The facts and redacted portion of the decision are from Supreme Court G.R. 189609 (29 January 2018).