Mercury Drug Corporation v. Republic Surety

Summary

Mercury Drug leased building from Republic Surety with initial certification of structural soundness. After 16 months, Mercury discovered structural defects and suspended rental payments pending proper repairs and certification. Surety sued for unpaid rent totaling over P3 million. The Supreme Court affirmed lower courts' rulings that Mercury was estopped from questioning the building's condition after expressly acknowledging it was tenantable and occupying it for 16 months. Since Mercury contractually assumed responsibility for repairs and maintenance, it could not invoke Article 1658 of the Civil Code allowing rent suspension for lessor's failure to make necessary repairs. The Court found no fraud by Surety and held Mercury liable for all unpaid rentals, interest, VAT, and attorney's fees. The decision establishes that tenants cannot unilaterally suspend rent payments based on subsequently discovered defects when they have contractually acknowledged the property's good condition and assumed repair obligations.