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This case involves a dispute over a lease agreement for theaters between OVEC and Sy. Sy fell behind on rental payments and amusement taxes, so OVEC repossessed the theaters. Sy sued for reformation of the lease. The court found that OVEC's repossession was valid due to Sy's defaults. It upheld awarding damages to OVEC from the injunction bond posted by CBISCO during the case. The Court of Appeals and Supreme Court affirmed, finding the forfeiture clause valid and the damages award against the bond proper.
This case involves a dispute over a lease agreement for theaters between OVEC and Sy. Sy fell behind on rental payments and amusement taxes, so OVEC repossessed the theaters. Sy sued for reformation of the lease. The court found that OVEC's repossession was valid due to Sy's defaults. It upheld awarding damages to OVEC from the injunction bond posted by CBISCO during the case. The Court of Appeals and Supreme Court affirmed, finding the forfeiture clause valid and the damages award against the bond proper.
This case involves a dispute over a lease agreement for theaters between OVEC and Sy. Sy fell behind on rental payments and amusement taxes, so OVEC repossessed the theaters. Sy sued for reformation of the lease. The court found that OVEC's repossession was valid due to Sy's defaults. It upheld awarding damages to OVEC from the injunction bond posted by CBISCO during the case. The Court of Appeals and Supreme Court affirmed, finding the forfeiture clause valid and the damages award against the bond proper.
G.R. No. 85161, September 9, 1991 | 201 reformation of the lease agreement, SCRA 458 damages and injunction and by virtue of a FACTS restraining order dated February 12, 1980 Oscar Ventanilla Enterprises Corporation followed by an order directing the (OVEC), as lessor, and the petitioner issuance of a Enrique F. Sy, as lessee, entered into a (6 writ of preliminary injunction issued in said years) lease agreement over the Avenue, case, Sy regained possession and Broadway and Capitol Theaters and the operation of the Avenue, Broadway and land on which they are situated in Capital theaters. Cabanatuan City, including their air- The trial court arrived at the conclusions conditioning systems, projectors and that Sy is not entitled to the reformation of accessories needed for showing the films the lease agreement; that the or motion pictures. After more than two (2) repossession of the leased premises by years of operation, the lessor OVEC made OVEC after the cancellation and demands for the repossession of the said termination of the lease was in accordance leased properties in view of the Sy's with the stipulation of the parties in the arrears in monthly rentals and non- said agreement and the law applicable payment of amusement taxes. thereto and that the consequent forfeiture By reason of Sy's request for of Sy's cash deposit in favor of reconsideration of OVECs demand for OVEC was clearly agreed upon by them in repossession of the three (3) theaters, the the lease agreement. The trial court former was allowed to continue operating further concluded that Sy was not entitled the leased premises upon his conformity to the writ of preliminary injunction issued to in his favor after the commencement of certain conditions imposed by the latter in the action and that the injunction bond a supplemental agreement dated August filed by Sy is liable for whatever damages 13, 1979. In pursuance of their latter OVEC may have suffered by reason of the agreement, Sy's arrears in rental was injunction. reduced. From this decision of the trial court, Sy However, the accrued amusement tax and (CBISCO) appealed the decision in liability of the three (3) theaters to the toto while OVEC appealed insofar as the City Government of Cabanatuan City had decision failed to hold the injunction bond accumulated to P84,000.00 despite the liable for damages awarded by the fact that Sy had been deducting the trial court. amount of P4,000.00 from his monthly The respondent Court of Appeals held rental with the obligation to remit the said that the cancellation or termination of the deductions to the city government. agreement prior to its expiration period is Hence, letters of demand dated January 7, justified as it was brought about by Sy's 1980 and February 3, 1980 were sent to own default in his compliance with the Sy demanding payment of the arrears in terms of the agreement and not rentals and amusement tax delinquency. "motivated by fraud or greed." It also SY failed to pay the abovementioned affirmed the award to OVEC of the amount amounts in full Consequently, OVEC of P100,000.00 chargeable against the padlocked the gates of the injunction bond posted by CBISCO which three theaters under lease and took was soundly and amply justified by the possession thereof in the morning of trial court. February 11, 1980. The respondent Court likewise found no the principal obligation. They are first, merit in OVECS appeal and held that the when there is a stipulation to the contrary; trial court did not err in not charging and second, when the obligor is sued for holding the injunction bond posted by Sy refusal to pay the agreed penalty; and liable for all the awards as the undertaking third, when the obligor is guilty of fraud of CBISCO under the bond referred only to (Article 1226, par. 1, New Civil Code). damages, which OVEC may suffer as a It is evident that in all said cases, the result of the injunction. purpose of the penalty is to punish the Hence, the present petition obligor. Therefore, the obligee can recover from the obligor not only the penalty but ISSUE also the damages resulting from the non- W/N the Court of Appeals erred in holding fulfillment or defective performance of the CBISCOs bond liable principal obligation. In the case at bar, inasmuch as the RULING forfeiture clause provides that the deposit No. A provision which calls for the shall be deemed forfeited, without forfeiture of the remaining deposit still in prejudice to any other obligation still the possession of the lessor, without owing by the lessee to the lessor, the prejudice to any other obligation still penalty cannot substitute for the owing, in the event of the termination or P100,000.00 supposed damage resulting cancellation of the agreement by reason from the issuance of the injunction against of the lessee's violation of any of the the P290,000.00 remaining cash deposit. terms and conditions of the agreement is This supposed damage suffered by OVEC a penal clause that may be validly entered was the alleged P10,000.00 a month into. increase in rental from P50,000.00 to A penal clause is an accessory P60,000,00), which OVEC failed to realize obligation, which the parties attach to a for ten months from February to principal obligation for the purpose of November, 1980 in the total sum of insuring the performance thereof by P100,000.00. imposing on the debtor a special This opportunity cost which was duly presentation proven before the trial court, was correctly (generally consisting in the payment of a made chargeable by sum of money) in case the obligation is the said court against the injunction bond not fulfilled or is irregularly or posted by CBISCO. inadequately fulfilled There is likewise no merit to the claim of As a general rule, in obligations with a petitioners that respondent Court penal clause, the penalty shall substitute committed serious error of law and grave the indemnity for damages and the abuse of discretion in not dismissing payment of interests in case of non- private respondent's counterclaim for compliance. In such case, proof of actual failure to damages suffered by the creditor is not pay the necessary docket fee, which is an necessary in order that the penalty may issue raised for the first time in this be demanded (Article petition. Thus, We allowed the amendment 1228, New Civil Code). of the complaint by specifying the amount However, there are exceptions to the of damages within a non extendible period rule that the penalty shall substitute the of five (5) days from notice and the indemnity for damages and the payment reassessment of the filing fees. of interests in case of non-compliance with ACCORDINGLY, finding no merit in the grounds relied upon by petitioners in their are AFFIRMED. petition, the same is hereby DENIED and the decision dated June 15, 1988 and the resolution dated September 21, 1988, both of the respondent Court of Appeals