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1191 Recission/Resolution
SECOND DIVISION
[G.R. No. 139523. May 26, 2005]
SPS. FELIPE AND LETICIA CANNU, petitioners, vs. SPS.
GIL AND FERNANDINA GALANG AND NATIONAL HOME
MORTGAGE FINANCE CORPORATION, respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari which seeks to
set aside the decision[1] of the Court of Appeals dated 30
September 1998 which affirmed with modification the decision of
Branch 135 of the Regional Trial Court (RTC) of Makati City,
dismissing the complaint for Specific Performance and Damages
filed by petitioners, and its Resolution[2] dated 22 July 1999
denying petitioners motion for reconsideration.
A complaint[3] for Specific Performance and Damages was filed
by petitioners-spouses Felipe and Leticia Cannu against
respondents-spouses Gil and Fernandina Galang and the
National Home Mortgage Finance Corporation (NHMFC) before
Branch 135 of the RTC of Makati, on 24 June 1993. The case
was docketed as Civil Case No. 93-2069.
The facts that gave rise to the aforesaid complaint are as follows:
Respondents-spouses Gil and Fernandina Galang obtained a
loan from Fortune Savings & Loan Association for P173,800.00
to purchase a house and lot located at Pulang Lupa, Las Pias,
with an area of 150 square meters covered by Transfer
Certificate of Title (TCT) No. T-8505 in the names of
respondents-spouses. To secure payment, a real estate
mortgage was constituted on the said house and lot in favor of
Fortune Savings & Loan Association. In early 1990, NHMFC
purchased the mortgage loan of respondents-spouses from
Fortune Savings & Loan Association forP173,800.00.
Respondent Fernandina Galang authorized[4] her attorney-infact, Adelina R. Timbang, to sell the subject house and lot.
We do not agree.
There is sufficient evidence showing that demands were made
from petitioners to comply with their obligation. Adelina R.
Timbang, attorney-in-fact of respondents-spouses, per
instruction of respondent Fernandina Galang, made constant
follow-ups after the last payment made on 28 November 1991,
but petitioners did not pay.[44] Respondent Fernandina Galang
stated in her Answer[45] that upon her arrival from America in
October 1992, she demanded from petitioners the complete
compliance of their obligation by paying the full amount of the
consideration (P120,000.00) or in the alternative to vacate the
property in question, but still, petitioners refused to fulfill their
obligations under the Deed of Sale with Assumption of
Mortgage. Sometime in March 1993, due to the fact that full
payment has not been paid and that the monthly amortizations
with the NHMFC have not been fully updated, she made her
intentions clear with petitioner Leticia Cannu that she will rescind
or annul the Deed of Sale with Assumption of Mortgage.
We likewise rule that there was no waiver on the part of
petitioners to demand the rescission of the Deed of Sale with
Assumption of Mortgage. The fact that respondents-spouses
accepted, through their attorney-in-fact, payments in installments
does not constitute waiver on their part to exercise their right to
rescind the Deed of Sale with Assumption of Mortgage. Adelina
Timbang merely accepted the installment payments as an
accommodation to petitioners since they kept on promising they
would pay. However, after the lapse of considerable time (18
months from last payment) and the purchase price was not yet
fully paid, respondents-spouses exercised their right of
rescission when they paid the outstanding balance of the
mortgage loan with NHMFC. It was only after petitioners
stopped paying that respondents-spouses moved to exercise
their right of rescission.
Petitioners cite the case of Angeles v. Calasanz[46] to support
their claim that respondents-spouses waived their right to
rescind. We cannot apply this case since it is not on all fours
with the case before us. First, in Angeles, the breach was only
slight and casual which is not true in the case before
us. Second, in Angeles, the buyer had already paid more than
the principal obligation, while in the instant case, the buyers
(petitioners) did not pay P45,000.00 of the P120,000.00 they
were obligated to pay.
We find petitioners statement that there is no evidence of
prejudice or damage to justify rescission in favor of respondentsspouses to be unfounded. The damage suffered by
respondents-spouses is the effect of petitioners failure to fully
comply with their obligation, that is, their failure to pay the
remaining P45,000.00 and to update the amortizations on the
mortgage loan with the NHMFC. Petitioners have in their
possession the property under litigation. Having parted with their
house and lot, respondents-spouses should be fully
compensated for it, not only monetarily, but also as to the terms
and conditions agreed upon by the parties. This did not happen
in the case before us.
Citing Seva v. Berwin & Co., Inc.,[47] petitioners argue that no
rescission should be decreed because there is no evidence on
record that respondent Fernandina Galang is ready, willing and
able to comply with her own obligation to restore to them the
total payments they made. They added that no allegation to that
effect is contained in respondents-spouses Answer.
We find this argument to be misleading.
First, the facts obtaining in Seva case do not fall squarely with
the case on hand. In the former, the failure of one party to
perform his obligation was the fault of the other party, while in
the case on hand, failure on the part of petitioners to perform
their obligation was due to their own fault.
Second, what is stated in the book of Justice Edgardo L. Paras is
[i]t (referring to the right to rescind or resolve) can be demanded
only if the plaintiff is ready, willing and able to comply with his
own obligation, and the other is not. In other words, if one party
has complied or fulfilled his obligation, and the other has not,
then the former can exercise his right to rescind. In this case,
respondents-spouses complied with their obligation when they
gave the possession of the property in question to
petitioners. Thus, they have the right to ask for the rescission of
the Deed of Sale with Assumption of Mortgage.
On the fourth assigned error, petitioners, relying on Article 1383
of the Civil Code, maintain that the Court of Appeals erred when
it failed to consider that the action for rescission is subsidiary.
Their reliance on Article 1383 is misplaced.
The subsidiary character of the action for rescission applies to
contracts enumerated in Articles 1381[48] of the Civil Code. The
contract involved in the case before us is not one of those
mentioned therein. The provision that applies in the case at bar
is Article 1191.
In the concurring opinion of Justice Jose B.L. Reyes in Universal
Food Corp. v. Court of Appeals,[49] rescission under Article 1191
was distinguished from rescission under Article 1381. Justice
J.B.L. Reyes said:
. . . The rescission on account of breach of stipulations is not
predicated on injury to economic interests of the party plaintiff
but on the breach of faith by the defendant, that violates the
reciprocity between the parties. It is not a subsidiary action, and
Article 1191 may be scanned without disclosing anywhere that
the action for rescission thereunder is subordinated to anything
other than the culpable breach of his obligations by the
defendant. This rescission is a principal action retaliatory in
character, it being unjust that a party be held bound to fulfill his
promises when the other violates his. As expressed in the old
Latin aphorism: Non servanti fidem, non est fides
servanda. Hence, the reparation of damages for the breach is
purely secondary.
The CA correctly ruled that R.A No. 6552, which governs sales
of real estate on installment, is applicable in the resolution of this
case.
This case originated as an action for unlawful detainer.
Respondent is alleged to be illegally withholding possession of
the subject property after the termination of the Contract to Sell
between Patricio and respondent. It is, therefore, incumbent
upon petitioner to prove that the Contract to Sell had been
cancelled in accordance with R.A. No. 6552.
The pertinent provision of R.A. No. 6552 reads:
Sec. 3. In all transactions or contracts involving the sale or
financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots,
commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four as amended by
Republic Act Numbered Sixty-three hundred eighty-nine, where
the buyer has paid at least two years of installments, the buyer is
entitled to the following rights in case he defaults in the payment
of succeeding installments:
(a) To pay, without additional interest, the unpaid installments
due within the total grace period earned by him, which is hereby
fixed at the rate of one month grace period for every one year of
installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of
the contract and its extensions, if any.
(b) If the contract is cancelled, the seller shall refund to the
buyer the cash surrender value of the payments on the
property equivalent to fifty percent of the total payments made
and, after five years of installments, an additional five percent
every year but not to exceed ninety percent of the total payments
made: Provided, That the actual cancellation of the contract
shall take place after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of
the contract by a notarial act and upon full payment of the
cash surrender value to the buyer.9
R.A. No. 6552, otherwise known as the "Realty Installment Buyer
Protection Act," recognizes in conditional sales of all kinds of real
estate (industrial, commercial, residential) the right of the seller
to cancel the contract upon non-payment of an installment by the
buyer, which is simply an event that prevents the obligation of
the vendor to convey title from acquiring binding force.10 The
Court agrees with petitioner that the cancellation of the Contract
to Sell may be done outside the court particularly when the buyer
agrees to such cancellation.
However, the cancellation of the contract by the seller must be in
accordance with Sec. 3 (b) of R.A. No. 6552, which requires a
notarial act of rescission and the refund to the buyer of the full
payment of the cash surrender value of the payments on the
property. Actual cancellation of the contract takes place after 30
days from receipt by the buyer of the notice of cancellation or the
Php
3,800,000.00
1,000,000.00
DISCOUNT
100,000.00
PROJECT COST
(MATERIALS &
PhP
2,700,000.00
INSTALLATION)
(Emphasis in the original)
The second contract essentially contains the same terms and
conditions as follows:6
That in consideration of the payment herein mentioned to be
made by the First Party (defendant), the Second Party agrees to
furnish, supply, install & integrate the most modern
INTEGRATED BRIDGE SYSTEM located at Northwestern
University MOCK BOAT in accordance with the general
conditions, plans and specifications of this contract.
SUPPLY & INSTALLATION OF THE FOLLOWING:
1. ARPA RADAR SIMULATION ROOM
xxxx
2. GMDSS SIMULATION ROOM
xxxx
TOTAL COST: PhP 270,000.00
(Emphasis in the original)
Common to both contracts are the following provisions: (1) the
IBS and its components must be compliant with the IMO and
CHED standard and with manuals for simulators/major
equipment; (2) the contracts may be terminated if one party
commits a substantial breach of its undertaking; and (3) any
dispute under the agreement shall first be settled mutually
between the parties, and if settlement is not obtained, resort
shall be sought in the courts of law.
Subsequently, Northwestern paid P1 million as down payment to
GL Enterprises. The former then assumed possession of
Northwesterns old IBS as trade-in payment for its service. Thus,
the balance of the contract price remained at P1.97 million.7
Two months after the execution of the contracts, GL Enterprises
technicians delivered various materials to the project site.
However, when they started installing the components,
respondent halted the operations. GL Enterprises then asked for
an explanation.8
Northwestern justified the work stoppage upon its finding that the
delivered equipment were substandard.9 It explained further that
GL Enterprises violated the terms and conditions of the
contracts, since the delivered components (1) were old; (2) did
not have instruction manuals and warranty certificates; (3)
contained indications of being reconditioned machines; and (4)
did not meet the IMO and CHED standards. Thus, Northwestern
demanded compliance with the agreement and suggested that
GL Enterprises meet with the formers representatives to iron out
the situation.
Instead of heeding this suggestion, GL Enterprises filed on 8
September 2004 a Complaint10 for breach of contract and prayed
for the following sums: P1.97 million, representing the amount
that it would have earned, had Northwestern not stopped it from
performing its tasks under the two contracts; at least P100,000
The injured party may choose between the fulfillment and the
rescission of the obligation, with payment of damages in either
case. He may also seek rescission, even after he has chosen
fulfillment, if the latter should become impossible.
More in point is Section 23 of Presidential Decree No. 957, the
rule governing the sale of condominiums, which provides:
Section 23. Non-Forfeiture of Payments.1wphi1 No installment
payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in
favor of the owner or developer when the buyer, after due notice
to the owner or developer, desists from further payment due to
the failure of the owner or developer to develop the subdivision
or condominium project according to the approved plans and
within the time limit for complying with the same. Such buyer
may, at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with
interest thereon at the legal rate. (Emphasis supplied).
Conformably with these provisions of law, respondents are
entitled to rescind the contract and demand reimbursement for
the payments they had made to petitioners.
Notably, the issues had already been settled by the Court in the
case of Fil-Estate Properties, Inc. v. Spouses Go13promulgated
on 17 August 2007, where the Court stated that the Asian
financial crisis is not an instance of caso fortuito. Bearing the
same factual milieu as the instant case, G.R. No. 165164
involves the same company, Fil-Estate, albeit about a different
condominium property. The company likewise reneged on its
obligation to respondents therein by failing to develop the
condominium project despite substantial payment of the contract
price. Fil-Estate advanced the same argument that the 1997
Asian financial crisis is a fortuitous event which justifies the delay
of the construction project. First off, the Court classified the issue
as a question of fact which may not be raised in a petition for
review considering that there was no variance in the factual
findings of the HLURB, the Office of the President and the Court
of Appeals. Second, the Court cited the previous rulings of Asian
Construction and Development Corporation v. Philippine
Commercial International Bank14 and Mondragon Leisure and
Resorts Corporation v. Court of Appeals15 holding that the 1997
Asian financial crisis did not constitute a valid justification to
renege on obligations. The Court expounded:
Also, we cannot generalize that the Asian financial crisis in 1997
was unforeseeable and beyond the control of a business
corporation. It is unfortunate that petitioner apparently met with
considerable difficulty e.g. increase cost of materials and labor,
even before the scheduled commencement of its real estate
project as early as 1995. However, a real estate enterprise
engaged in the pre-selling of condominium units is concededly a
master in projections on commodities and currency movements
and business risks. The fluctuating movement of the Philippine
peso in the foreign exchange market is an everyday occurrence,
4. Noel Alibadbad
126,684.40
5. Rogelio Pintuan
26,684.40
6. Danilo Crisostomo
26,684.40
7. Romulo Macalinao
26,684.40
8. Nestor Ferrer
26,684.40
9. Ricky Cuesta
26,684.40
10. Andrada Rolly
26,684.40
11. Larry Rogola
26,684.40
12. Francisco Lenogon
26,684.40
13. Augosto Quinto
126,684.40
14. Arfe Beramo
26,684.40
15. Bonifacio
Trinidad
(same)
16. Alfredo Azcarraga
26,684.40
17. Ernesto Magno
26,684.40
18. Honario Hortecio
126,684.40
19. Nelbert
Pineda
(same)
20. Glen Estipular
26,684.40
21. Francisco Compuesto
26,684.40
22. Isabelito
Cortes
(same)
23. Maturan Rosauro
26,684.40
24. Samson Canas
26,684.40
25. Febien Isip
26,684.40
26. Jesus Riparip
26,684.40
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
(same)
SO ORDERED.
muscles.
Partial amputation BK left leg with severance of gastrosoleus and
antero-lateral compartment of lower leg.
Fracture, open comminuted, both tibial4
Thereafter, respondents filed a Complaint5 for damages
against CDCP, BLTB, Espiridion Payunan, Jr. and Wilfredo
Datinguinoo before the Regional Trial Court of Manila,
Branch 13. They alleged (1) that Payunan, Jr. and
Datinguinoo, who were the drivers of CDCP and BLTB
buses, respectively, were negligent and did not obey traffic
laws; (2) that BLTB and CDCP did not exercise the
diligence of a good father of a family in the selection and
supervision of their employees; (3) that BLTB allowed its
bus to operate knowing that it lacked proper maintenance
thus exposing its passengers to grave danger; (4) that they
suffered actual damages amounting to P250,000.00 for
Estrella and P300,000.00 for Fletcher; (5) that they suffered
physical discomfort, serious anxiety, fright and mental
anguish, besmirched reputation and wounded feelings,
moral shock, and lifelong social humiliation; (6) that
defendants failed to act with justice, give respondents their
due, observe honesty and good faith which entitles them to
claim for exemplary damage; and (7) that they are entitled
to a reasonable amount of attorney's fees and litigation
expenses.
CDCP filed its Answer6 which was later amended to include
a third-party complaint against Philippine Phoenix Surety
and Insurance, Inc. (Phoenix).7
On February 9, 1993, the trial court rendered a decision
finding CDCP and BLTB and their employees liable for
damages, the dispositive portion of which, states:
WHEREFORE, judgment is rendered:
In the Complaint
1. In favor of the plaintiffs and against the defendants
BLTB, Wilfredo Datinguinoo, Construction and
Development Corporation of the Philippines (now PNCC)
and Espiridion Payunan, Jr., ordering said defendants,
jointly and severally to pay the plaintiffs the sum of
P79,254.43 as actual damages and to pay the sum of
P10,000.00 as attorney's fees or a total of P89,254.43;
2. In addition, defendant Construction and Development
Corporation of the Philippines and defendant Espiridion
Payunan, Jr., shall pay the plaintiffs the amount of Fifty
Thousand (P50,000.00) Pesos to plaintiff Rachel Fletcher
and Twenty Five Thousand (P25,000.00) Pesos to plaintiff
Rebecca Estrella;
not. The train hit the rear end of the van, and the impact
threw nine of the 12 students in the rear, including Aaron,
out of the van. Aaron landed in the path of the train, which
dragged his body and severed his head, instantaneously
killing him. Alano fled the scene on board the train, and did
not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron,
the Zarates commenced this action for damages against
Alfaro, the Pereas, PNR and Alano. The Pereas and
PNR filed their respective answers, with cross-claims
against each other, but Alfaro could not be served with
summons.
At the pre-trial, the parties stipulated on the facts and
issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of
Aaron John L. Zarate;
(2) Spouses Zarate engaged the services of spouses
Perea for the adequate and safe transportation carriage of
the former spouses' son from their residence in Paraaque
to his school at the Don Bosco Technical Institute in Makati
City;
(3) During the effectivity of the contract of carriage and in
the implementation thereof, Aaron, the minor son of
spouses Zarate died in connection with a vehicular/train
collision which occurred while Aaron was riding the
contracted carrier Kia Ceres van of spouses Perea, then
driven and operated by the latter's employee/authorized
driver Clemente Alfaro, which van collided with the train of
PNR, at around 6:45 A.M. of August 22, 1996, within the
vicinity of the Magallanes Interchange in Makati City, Metro
Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject
site of the vehicular/train collision was a railroad crossing
used by motorists for crossing the railroad tracks;
(5) During the said time of the vehicular/train collision,
there were no appropriate and safety warning signs and
railings at the site commonly used for railroad crossing;
(6) At the material time, countless number of Makati bound
public utility and private vehicles used on a daily basis the
site of the collision as an alternative route and short-cut to
Makati;
(7) The train driver or operator left the scene of the
incident on board the commuter train involved without
waiting for the police investigator;
taking that route. On the other hand, with his familiarity with
that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding
his lack of care was that loud music was playing inside the
air-conditioned van at the time of the accident. The
loudness most probably reduced his ability to hear the
warning horns of the oncoming train to allow him to
correctly appreciate the lurking dangers on the railroad
tracks. Also, he sought to overtake a passenger bus on the
left side as both vehicles traversed the railroad tracks. In so
doing, he lost his view of the train that was then coming
from the opposite side of the passenger bus, leading him to
miscalculate his chances of beating the bus in their race,
and of getting clear of the train. As a result, the bus avoided
a collision with the train but the van got slammed at its rear,
causing the fatality. Lastly, he did not slow down or go to a
full stop before traversing the railroad tracks despite
knowing that his slackening of speed and going to a full
stop were in observance of the right of way at railroad
tracks as defined by the traffic laws and regulations.28He
thereby violated a specific traffic regulation on right of way,
by virtue of which he was immediately presumed to be
negligent.29
The omissions of care on the part of the van driver
constituted negligence,30 which, according to Layugan v.
Intermediate Appellate Court,31 is "the omission to do
something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a
prudent and reasonable man would not do,32 or as Judge
Cooley defines it, (t)he failure to observe for the protection
of the interests of another person, that degree of care,
precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury."33
The test by which to determine the existence of negligence
in a particular case has been aptly stated in the leading
case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence
in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then
he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct
of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined
by reference to the personal judgment of the actor in the
awarded not for loss of time or earnings but for loss of the
deceaseds power or ability to earn money.39
This favorable treatment of the Zarates claim is not
unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year
medical student Edgardo Carriagas earning capacity,
although he survived the accident but his injuries rendered
him permanently incapacitated, was computed to be that of
the physician that he dreamed to become. The Court
considered his scholastic record sufficient to justify the
assumption that he could have finished the medical course
and would have passed the medical board examinations in
due time, and that he could have possibly earned a modest
income as a medical practitioner. Also, in People v.
Sanchez,41the Court opined that murder and rape victim
Eileen Sarmienta and murder victim Allan Gomez could
have easily landed good-paying jobs had they graduated in
due time, and that their jobs would probably pay them high
monthly salaries from P 10,000.00 to P 15,000.00 upon
their graduation. Their earning capacities were computed at
rates higher than the minimum wage at the time of their
deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baos,
the countrys leading educational institution in agriculture.
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and
exemplary damages awarded to the Zarates in the
respective amounts of P 2,500,000.00 and P 1,000,000.00
on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and
reasonable under the established circumstances of this
case because they were intended by the law to assuage
the Zarates deep mental anguish over their sons
unexpected and violent death, and their moral shock over
the senseless accident. That amount would not be too
much, considering that it would help the Zarates obtain the
means, diversions or amusements that would alleviate their
suffering for the loss of their child. At any rate, reducing the
amount as excessive might prove to be an injustice, given
the passage of a long time from when their mental anguish
was inflicted on them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages,
we should not reduce the amount if only to render effective
the desired example for the public good. As a common
carrier, the Pereas needed to be vigorously reminded to
THIRD DIVISION
[G.R. No. 157480. May 6, 2005]
PRYCE CORPORATION (formerly PRYCE PROPERTIES
CORPORATION), petitioner, vs. PHILIPPINE
AMUSEMENT AND GAMING
CORPORATION, respondent.
DECISION
PANGANIBAN, J.:
In legal contemplation, the termination of a contract is not
equivalent to its rescission. When an agreement is
terminated, it is deemed valid at inception. Prior to
termination, the contract binds the parties, who are thus
obliged to observe its provisions. However, when it is
rescinded, it is deemed inexistent, and the parties are
returned to their status quo ante. Hence, there is mutual
restitution of benefits received. The consequences of
termination may be anticipated and provided for by the
contract. As long as the terms of the contract are not
contrary to law, morals, good customs, public order or
public policy, they shall be respected by courts. The
judiciary is not authorized to make or modify contracts;
neither may it rescue parties from disadvantageous
stipulations. Courts, however, are empowered to reduce
iniquitous or unconscionable liquidated damages,
indemnities and penalties agreed upon by the parties.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, assailing the May 22, 2002 Decision[2] of
the Court of Appeals (CA) in CA-GR CV No. 51629 and its
March 4, 2003 Resolution[3] denying petitioners Motion for
Reconsideration. The assailed Decision disposed thus:
WHEREFORE, in view of the foregoing, judgment is
hereby rendered as follows: (1) In Civil Case No. 93-68266,
the appealed decision[,] is AFFIRMED with
MODIFICATION[,] ordering [Respondent] Philippine
Amusement and Gaming Corporation to pay [Petitioner]
Pryce Properties Corporation the total amount
ofP687,289.50 as actual damages representing the
accrued rentals for the quarter September to November
In its appeal, PPC faulted the trial court for the following
reasons: 1) failure of the court to award actual and moral
damages; 2) the 50 percent reduction of the amount PPC
was claiming; and 3) the courts ruling that the 2 percent
penalty was to be imposed from the date of the
promulgation of the Decision, not from the date stipulated in
the Contract.
On the other hand, PAGCOR criticized the trial court for the
latters failure to rule that the Contract of Lease had already
been terminated as early as September 21, 1993, or at the
latest, on October 14, 1993, when PPC received
PAGCORs letter dated October 12, 1993. The gaming
corporation added that the trial court erred in 1) failing to
consider that PPC was entitled to avail itself of the
provisions of Article XX only when PPC was the party
terminating the Contract; 2) not finding that there were
valid, justifiable and good reasons for terminating the
Contract; and 3) dismissing the Complaint of PAGCOR in
Civil Case No. 93-68337 for lack of merit, and not finding
PPC liable for the reimbursement of PAGCORS cash
deposits and of the value of improvements.
Ruling of the Court of Appeals
First, on the appeal of PAGCOR, the CA ruled that the
PAGCORS pretermination of the Contract of Lease was
unjustified. The appellate court explained that public
demonstrations and rallies could not be considered as
fortuitous events that would exempt the gaming corporation
from complying with the latters contractual
obligations. Therefore, the Contract continued to be
effective until PPC elected to terminate it on November 25,
1993.
Regarding the contentions of PPC, the CA held that under
Article 1659 of the Civil Code, PPC had the right to ask for
(1) rescission of the Contract and indemnification for
damages; or (2) only indemnification plus the continuation
of the Contract. These two remedies were alternative, not
cumulative, ruled the CA.
As PAGCOR had admitted its failure to pay the rentals for
September to November 1993, PPC correctly exercised the
option to terminate the lease agreement. Previously, the
Contract remained effective, and PPC could collect the
accrued rentals. However, from the time it terminated the
Contract on November 25, 1993, PPC could no longer
demand payment of the remaining rentals as part of actual
damages, the CA added.
Denying the claim for moral damages, the CA pointed out
the failure of PPC to show that PAGCOR had acted in
- versus -
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review
on Certiorari under Rule 45 of the Revised Rules of Court,
filed by petitioner Erminda F.Florentino, seeking to reverse
and set aside the Decision,[1] dated 10 October 2003 and
the Resolution,[2] dated 19 April 2006 of the Court of
Appeals in CA-G.R. CV No. 73853. The appellate court, in
its assailed Decision and Resolution, modified the Decision
dated 30 April 2001 of the Regional Trial Court (RTC)
of Makati, Branch 57, in Civil Case No. 00-1015, finding the
respondent Supervalue, Inc., liable for the sum
of P192,000.00, representing the security deposits made by
the petitioner upon the commencement of their Contract of
Lease. Thedispositive portion of the assailed appellate
courts Decision thus reads:
WHEREFORE, premises considered, the appeal is
PARTLY GRANTED. The April 30, 2001 Decision of the
Regional Trial Court of Makati, Branch 57 is therefore
MODIFIED to wit: (a) the portion ordering the [herein
respondent] to pay the amount of P192,000.00
representing
the security deposits and P50,000.00 as
G.R.
No. 172384
attorneys fees in favor of the [herein petitioner] as well
as giving [respondent] the option to reimburse [petitioner]
Present:
of the value of the improvements introduced by the
YNARES-SANTIAGO,
[petitioner]
on the leased [premises] should [respondent]
Chairperson,
choose
to
appropriate
AUSTRIA-MARTINEZ, itself or require the [petitioner] to
remove the improvements, is hereby REVERSED and SET
CHICO-NAZARIO,
ASIDE; andand
(b) the portion ordering the return to [petitioner]
NACHURA,
the
properties
seized by [respondent] after the former
REYES, JJ.
settled her obligation with the latter is however
MAINTAINED.[3]
Promulgated:
The factual and procedural antecedents of the instant
petition are as follows:
September 12, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Petitioner is doing business under the business name
Empanada Royale, a sole proprietorship engaged in the
- - - - - - - - -x
retail of empanada with outlets in different malls and
business establishments within Metro Manila.[4]
DECISION
Respondent, on the other hand, is a domestic corporation
engaged in the business of leasing stalls and commercial
SUPERVALUE, INC.,
Respondent.
I.
Whether or not the respondent is liable to return the
security deposits to the petitions.
II. Whether or not the respondent is liable to reimburse
the petitioner for the sum of the improvements she
introduced in the leased premises.
III. Whether or not the respondent is liable for attorneys
fees.[27]
The appellate court, in finding that the respondent is
authorized to forfeit the security deposits, relied on the
provisions of Sections 5 and 18 of the Contract of Lease, to
wit:
Section 5. DEPOSIT. The LESSEE shall make a
cash deposit in the sum of SIXTY THOUSAND PESOS
(P60,000.00) equivalent to three (3) months rent as
security for the full and faithful performance to each
and every term, provision, covenant and condition of
this lease and not as a pre-payment of rent. If at any
time during the term of this lease the rent is increased[,] the
LESSEE on demand shall make an additional deposit equal
to the increase in rent. The LESSOR shall not be required
to keep the deposit separate from its general funds and the
deposit shall not be entitled to interest. The deposit shall
remain intact during the entire term and shall not be applied
as payment for any monetary obligations of the LESSEE
under this contract. If the LESSEE shall faithfully perform
every provision of this lease[,] the deposit shall be refunded
to the LESSEE upon the expiration of this Lease and upon
satisfaction of all monetary obligation to the LESSOR.
xxxx
Section 18. TERMINATION. Any breach, nonperformance or non-observance of the terms and
conditions herein provided shall constitute default
which shall be sufficient ground to terminate this
lease, its extension or renewal. In which event, the
LESSOR shall demand that LESSEE immediately vacate
the premises, and LESSOR shall forfeit in its favor the
deposit tendered without prejudice to any such other
appropriate action as may be legally authorized.[28]