Rescission of Lease Contract
comply with his obligations under the contract.
G.R. No. 188467
RENATO MA. R. PERALTA, Petitioner
vs
JOSE ROY RAVAL, Respondent
x-----------------------x
JOSE ROY B. RAVAL, Petitioner,
vs.
RENATO MA. R. PERALTA, Respondent.
CASE DOCTRINE: In rescission of lease
agreements, Article 1659 of the NCC applies as a
rule. It reads: Article 1659. If the lessor or the lessee
should not comply with the obligations set forth in
Articles 1654 and 1657, the aggrieved party may ask for
the rescission of the contract and indemnification for
damages, or only the latter, allowing the contract to
remain in force.
FACTS:
The controversy involves a Lease Agreement over
two parcels of land with a lease term of 40 years
entered into by and between Spouses Argaza
(Lessors) and Petitioner Peralta (Lessee) executed
on Febuary 19,1974. Under the lease contract,
Peralta was to construct on the leased land a
building that should become property of the
Spouses Argaza upon lease termination, he is also
required to pay realty taxes for both lots, and to
develop a water system for the use of both parties to
the lease contract.
On July 28,1995, a Deed of Assignment was
executed by Flaviano Arzaga, Jr. (Flaviano Jr.),
being an adopted son and heir of the Spouses
Arzaga transferring all his interests, rights and
participation in the subject properties for a
consideration to respondent Raval. Peralta refused
to recognize validity of the assignment, prompting
him to still deposit his rental payments in the
account of Flaviano Jr.
The respondent then started demanding petitioner's
compliance with lease contract's terms and
conditions but the latter fails to do. Consequently,
responded filed an action for rescission of the lease
agreement based on Article 1191 for failure to
Petitioner then filed a counterclaim assailing the
action for rescission has already prescribed based
on Article 1389 and that the deed of assignment is
null and void. The RTC dismissed the complaint
and denied the rescission n which was
affirmed by the CA. Hence, this instant petition for
review.
ISSUE:
 WON the NCC provisions cited as basis for
rescission applies to contracts of lease.
RULING:
While the issue of whether or not the lease should
be ordered rescinded has become moot and
academic, the Court nevertheless found that the
NCC provisions relied upon by Raval in instituting
the action for rescission do not apply to the subject
lease contract.
There are various provisions under the NCC that
apply to rescissions of contracts. It must be
emphasized though that specifically on the matter
of rescission of lease agreements; Article 1659 of the
NCC applies as a rule.
It reads: Article 1659. If the lessor or the lessee should
not comply with the obligations set forth in Articles 1654
and 1657, the aggrieved party may ask for the rescission
of the contract and indemnification for damages, or only
the latter, allowing the contract to remain in force.
Given the rules that exclusively apply to leases, the
other provisions of the NCC that deal with the issue
of rescission may not be applicable to contracts of
lease. In this case, Peralta's reference to Article 1389,
when he argued that Raval's action had already
prescribed for having been filed more than four
years. after the execution of the lease contract in
1974, is misplaced. For the same reason, Peralta
erred in arguing that Raval's action should only be
deemed a subsidiary remedy, such that it could not
have been validly instituted if there were other legal
means for reparation. Article 1389 applies to
rescissions in Articles 1380 and 1381, which are
distinct from rescissions of lease under Article 1659.