RAMOS, MONICA MAY R.

2016010501

Topic: Sublease: Delay in Payment of Rentals

1994 Bar
Article 1673

In January 1993. Four- Gives Corporation leased the entire twelve floors of the GOS
Towers Complex, for a period of ten years at a monthly rental of P3,000,000.00. There is a
provision in the contract that the monthly rentals should be paid within the first five days of the
month. For the month of March, May June, October and December 1993, the rentals were not paid
on time with some rentals being delayed up to ten days. The delay was due to the heavy paper
work involved in processing the checks. Four-Gives Corporation also subleased five of the twelve
floors to wholly-owned subsidiaries. The lease contract expressly prohibits the assignment of the
lease contract or any portion thereof. The rental value of the building has increased by 50% since
its lease to Four-Gives Corporation.
1.) Can the building owner eject Four-Gives Corporation on grounds of the repeated delays
in the payment of the rent?

No. The building owner cannot eject Four-Gives Corporation

on the ground of repeated delays in the payment of rentals. There was not even a
demand for payment because the delay lasted for only a few days at the end of which
time payments were presumably made and were accepted. Therefore, no default. It
would be otherwise if the lease contract stated that in the payment of rentals within the
first five days of the month, time is of the essence or that the lessee will be in delay if
he falls to pay within the agreed period without need of demand.

Article 1673 (1) of the New Civil Code provides that the lessor may judicially eject the
lessee when the period agreed upon, or that which is fixed for the duration of leases
under articles 1682 and 1687, has expired. Article 1687 of the same Code provides that
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.

In this case, the building owner can judicially eject the tenant on the ground of lack of
payment of the price stipulated after a demand to vacate. (Article 1673
(2), New Civil Code)
 2.) Can the building owner ask for the cancellation of the contract for violation of the
provision against assignment?

No, the lessor cannot have the lease cancelled for alleged violation of the provision
against assignment. There is no assignment of the lease contract, or any portion thereof
made to the subsidiaries because only some floors were subleased to its subsidiaries.
Since the problem does not state that the contract of lease contains a prohibition against
sublease, the sublease is lawful, the rule being that in the absence of an express
prohibition a lessee may sublet the thing leased, in whole or in part, without prejudice
to his responsibility to the lessor for the performance of the contract.

Topic: Option Contract and Earnest Money

1993 Bar
Articles 1592 and 1991

LT applied with BPI to purchase a house and lot in Quezon City, one of its acquired assets. The
amount offered was P1,000,000.00 payable, as follows: P200,000.00 down payment, the balance
of P800,000.00 payable within 90 days from June 1,1985. BPI accepted the offer, whereupon LT
drew a check for P200,000.00 in favour of BPI which latter thereafter deposited in its account. On
September 5,1985, LT wrote BPI requesting extension until October 5,1985, due to the expected
delay in the remittance of the needed amount by his financier from the United States, LT wrote
BPI requesting a last extension until October 30,1985, within which to pay the balance. BPI denied
LTs request because another had offered to but the same property for P1,500,000.00. BPI cancelled
its agreement with LT offered to pay the amount by tendering a cashier’s check therefor but which
BPI refused to accept. LT then filed a complaint against BPI in the RTC for specific performance
and deposited in the court the amount of P800,000.00. Is BPI legally correct in cancelling its
contract with LT?
Answer:
No. There is already a perfected contract between LT and BPI after the latter has accepted the offer
made by LT by way of earnest money showing the latter was really in earnest, and given to the
seller to bind the bargain. Under the Civil Code, earnest money is considered part of the purchase
price and as proof of the perfection of the contract. The P200,000.00 given by LT representing
20% of the purchase price is earnest money. This is also supported by Article 1475 of the Civil
Code which states that contract of sale is perfected at the moment there is a meeting of the minds
upon the thing which is the object of the contract and upon the price. From the moment, the parties
may reciprocally demand performance, subject to the provisions of the law governing the form of
contracts.

Nowhere in the transaction indicates that BPI reserved its title property nor did it provide for any
automatic rescission in case of default. So when LT failed to pay the balance of P800,000.00
despite several extensions given by BPI, the latter could not validly rescind the contract without
complying with the provision of Article 1592 or Article 1191 on notarial or judicial rescission
respectively.

Art. 1592 provides that in the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right
take place, the vendee may pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by notarial act. After the
demand the court may not grant him a new term.

In the case at bar, it is undisputed that BPI never notified LT by notarial act that he was rescinding
the contract, and neither had he filed suit in court to rescind the sale. BPI cannot just consider the
sale cancelled by simply returning the downpayment which petitioner refused to accept.

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