Republic
of the Philippines
Supreme Court
Manila
THIRD DIVISION
CONCHITA TAN, doing business G.R. No. 172239
under the name MARMAN
TRADING, Present:
Petitioner,
AUSTRIA-MARTINEZ,* J.,
Acting Chairperson,
TINGA,**
- versus - CHICO-NAZARIO,
NACHURA, and
REYES, JJ.
Promulgated:
PLANTERS
PRODUCTS, INC.,
Respondent. March
28, 2008
x - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - x
D E C I S I O N
REYES, R.T., J.:
STRICT application of technical rules
of procedure should be shunned when they hinder rather than promote substantial
justice. Clear stipulation in a lease
contract should be interpreted literally in accordance with the intent of the
parties.
These principles are
relevant in this petition for review on certiorari
of the Decision[1] of
the Court of Appeals (CA) which affirmed with modification the Order[2]
of the Regional Trial Court (
The Facts
On
The LESSEE has the option to renew his
leasehold interest in the leased premises for an additional ten (10) years at
the expiration of the term of his lease under such terms and conditions as may
be agreed upon by the parties provided that the LESSEE shall give the LESSOR,
prior to the expiration of the term of this Lease, 180 days notice, in writing,
of his desire to procure such new Lease.[4]
On
On
PPI stood firm on its counter offer
and informed Marman of additional items that it wanted clarified and completed
prior to renewal,[9]
namely:
a. Proposed
repair plan, estimated cost and timetable of completion of the middle dock,
b. Proposed
relocation plan of sulfuric acid pipelines and timetable of completion duly
approved by PPI, and
c. Payment of
past due accounts.
On
On
On
PPI
filed its Answer[13]
alleging, as affirmative defenses, lack of jurisdiction and failure to state a
cause of action. It also raised as counterclaim the payment of unpaid rent,
cost of repair of the middle dock facility and damages.
On
On
WHEREFORE, defendant’s motion to dismiss the case on the grounds cited
as affirmative defenses in its Answer is denied for lack of merit. Summary judgment is hereby rendered in favor
of plaintiff Marman Trading and against defendant Planters Products, Inc. as
follows:
1. Ordering defendant to honor and recognize that the lease contracts
had been renewed for another ten (10) years from their original expiration, and
ordering defendant to execute the written contract of renewal of the lease
contracts for another ten (10) years from their expiration, the rental rate to
be determined by applying the agreed escalation rate of 7.75% to the rental
rate last paid by plaintiff;
2. Ordering defendant to pay plaintiff exemplary damages in the amount
of P200,000.00;
3. Ordering defendant to pay plaintiff attorney's fees and cost of
litigation in the amount of P200,000.00.
All counterclaims are hereby DISMISSED
for lack of merit.
SO ORDERED.[17]
In
granting specific performance, the
While
defendant correctly pointed out that a renewal provision, even if construed for
the benefit of one party, cannot be unilateral in the sense that there still
has to be a mutual agreement between the parties. Yet, it is equally true that the contract
cannot be renewed on the mere whim of the plaintiff since there has to be a
mutual agreement as to the terms and conditions of the renewal. However, it should be noted that the
provision had already specified a period of time for the renewal, particularly ten years. To follow defendant's line of thinking would
be to disregard completely a contractual agreement between the parties. Clearly, the term of the renewal had already
been pre-agreed upon, and can no longer be the subject of further negotiation. Moreover, this Court finds that the cases of Heirs of Dalisay v. Court of Appeals
(201 SCRA 751) and Fernandez v. Court of
Appeals (166 SCRA 577) cited by defendant are not directly applicable to
the instant case since the antecedent facts therein are much different from the
facts in this case.
x x x x
Moreover, this Court has the legal duty to
uphold and enforce to the letter the contractual obligations of the parties,
absent any showing that such obligations are contrary to laws, morals, good
customs and public policy. More so where
the terms being insisted on by defendant would make it impossible for plaintiff
to recover its investments. Plaintiff
correctly pointed out that “the imposition of unreasonable terms and exorbitant
terms is equivalent to an outright rejection of plaintiff's right to seek the
renewal of the lease contracts. This is
tantamount to negotiating in bad faith.”
The case of Tuason v. Del Asis
(107 Phil. 131) establishes the power of this Court to determine whether the
terms demanded by a lessor are exorbitant and to determine what is a reasonable
rent given the circumstances.
Using
such discretion, this Court finds that plaintiff is entitled to the renewal of
the lease contracts under the commercial terms mutually agreed upon for an additional
period of ten years, counted from the time of the expiration of the original
contracts. First of all, the length of
the term is already stated in the lease contracts, thus can no longer be
altered by one party without the consent of the other. The terms of the renewal provisions cannot be
disregarded – ten years is ten years no matter how you look at it. Thus, the intent of the parties when the
contracts were perfected should stand.
Furthermore, this Court finds that the shortening of the term despite
the increased rental rates and minimum volume constitutes unreasonable and
exorbitant terms that would leave one party unable to recoup its investments
while leaving the other party unjustly enriched at the expense of plaintiff. This Court cannot permit such an injustice to
take place.[18]
In
denying PPI’s counterclaims for non-payment of docket fees, the
As regards the affirmative defenses raised by
the defendants as grounds for a motion to dismiss, after much consideration
this Court finds the same bereft of merit.
While it is true that the failure to pay the docket fees would be
reasonable cause to have the complaint expunged from the records, this court
finds no defect in the amount of docket fees paid by plaintiff. The Manchester case cited by defendant
clearly states that all complaints should “specify the amount of damages being
prayed for not only in the body of the pleading but also in the prayer.” However, despite reading plaintiff's third
alternative cause of action several times over, this Court finds no indication
that plaintiff ever directly sought or prayed for the market value of the
improvements from defendant. The fact
that plaintiff stated in its complaint the alleged market value of the
improvements does not necessarily mean that it is praying for the compensation
of such amount, more so when it is clearly stated that what is sought is merely
a declaration of ownership. Besides, the
claim is only an alternative cause of action and does not have any bearing on
the resolution of the main complaint.
Anent
the contention that the complaint fails to state a cause of action since there
is no showing that plaintiff is entitled to the renewal of the lease contracts,
suffice it to say that this Court has already found, through summary judgment,
plaintiff to be entitled to the renewal of the lease contracts. This Court has already given its reasons for
finding that plaintiff had a valid cause of action for specific performance
against defendant. Thus, the ground
raised by defendant is evidently bereft of any legal basis at this point.[19]
Marman
moved for partial reconsideration[20]
but its motion was denied.[21] PPI appealed to the CA.
CA Disposition
On
WHEREFORE,
the appeal is PARTIALLY
GRANTED. The Order dated
SO ORDERED.[23]
The CA reversed the
As We see it, as far the provisions granting
an option to renew are concerned, the only term on which there has been a clear
agreement is the period of the renewed contract, i.e., ten (10) years. The provisions are silent as to the other
terms and conditions as these were still subject to agreement by both PPI and
Marman.
Under
Article 1318 of the Civil Code, there is no contract unless there is consent of
the contracting parties. Article 1319 of
the same Code further states that “consent is manifested by the meeting of
the offer and the acceptance upon the thing and the cause which are to
constitute the contract.” Thus, as a general rule, if the
parties come to an agreement on the essential points of a contract, that is, on
the object and the cause, there is already perfection even if there are other
points that have yet to be agreed upon or have been reserved for future
agreement.
This
being the case, should the acceptance by Marman of the economic conditions
proposed by PPI, a renewed contract of lease had already been perfected as the
other terms and conditions that have yet to be agreed upon were “irrelevant to
the instant case.” We disagree.
In
A. Magsaysay, Inc. vs. Cebu Portland Cement Co., the Supreme Court laid
down an exception to the general rule that an agreement on the essential points
of a contract already amounts to perfection.
Thus:
While
Article 1319 of the New Civil Code prescribes that ‘consent is manifested by
the meeting of the offer and the acceptance upon the thing and the cause which
are to constitute the contract,’ this rule does not apply to a situation like
the one before us, wherein one or both parties consider that other matters or
details, in addition to the subject matter and consideration, should be
stipulated and agreed upon. In that
case, the area of agreement must extend to all points that the parties deem
material or there is no contract.
Civil
law commentator Arturo M. Tolentino has a similar opinion.
If
the intention of one or both parties is that there be concurrence on all
points, the contract is not perfected if there is a point of disagreement, even
if there is already agreement on the essential elements of the contract. x x x.
If
there is no declaration that agreement on an accessory or subordinate matter is
necessary, the contract will be perfected as soon as there is concurrence on
the object and the cause. The regulation
of the accessory points will then be determined by future agreement, and, if
there is no agreement thereon, by the general rules established by law for the
particular case in the absence of agreement, such as the place of performance,
expenses for the delivery of the thing, etc.
In
the present case, the intention of both PPI and Marman is clearly to have an
agreement on all the points being discussed before there can be a renewal. This is evident from Marman’s letter to PPI
dated
The CA however affirmed the
A counterclaim is either compulsory
or permissive in nature.
A compulsory counterclaim is one
which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter of
the opposing party’s claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction.
As to permissive counterclaims, in Valencia vs. Court of Appeals, the
Supreme Court stated certain criteria or tests by which the compulsory or
permissive nature of specific counterclaims can be determined, summarized as
follows:
1. Are the issues of
fact and law raised by the claim and counterclaim
largely the same?
2. Would res judicata bar
a subsequent suit on defendant's claim absent the compulsory counterclaim rule?
3. Will substantially
the same evidence support or refute plaintiff’s claim as well as defendant's
counterclaim?
4. Is there any
logical relation between the claim and the counterclaim?
Tested
against these standards, We agree with the trial court that PPI’s counterclaim
is clearly permissive. The issues of
fact and law alone between Marman’s complaint and PPI’s counterclaim are
completely different. This being the
case, the trial court was correct in dismissing PPI’s counterclaim for PPI’s
failure to pay the prescribed docket fees.
It is settled that it is not only the filing of the complaint or
appropriate initiatory pleading, but the payment of the prescribed docket fees,
that vests the court with jurisdiction over the subject matter of the
action. The same rule applies to
permissive counterclaims.
Nonetheless,
PPI claims that its counterclaim cannot be dismissed in the absence of a motion
to dismiss being filed by Marman. We
disagree. As the trial court never
acquired jurisdiction over the permissive counterclaim filed by PPI, under
Section 1, Rule 9 of the Rules of Civil Procedure, the same may be dismissed motu proprio or even without a motion to
dismiss having been filed by Marman.
Respecting
the issues concerning whether the complaint filed by Marman stated a cause of
action and whether Marman paid the prescribed filing
fees, We find that these issues had been rendered moot
and academic in the light of the foregoing disquisition.[25] (Citations omitted)
Marman sought partial reconsideration[26]
of the CA decision but it was denied.[27] Hence, this petition before Us.
Issues
Petitioner
Marman raises triple issues[28]
for Our consideration, viz.:
I.
THE COURT OF APPEALS COMMITTED SERIOUS
REVERSIBLE ERROR OF LAW WHEN IT FAILED TO DISMISS THE APPEAL
OUTRIGHT FOR NOT BEING FILED IN ACCORDANCE WITH THE RULES OF COURT.
II.
THE COURT OF APPEALS COMMITTED GRIEVIOUS (SIC) REVERSIBLE ERROR OF LAW WHEN IT
RULED THAT THE PARTIES HAD NOT YET AGREED ON THE SUBSTANTIAL PORTIONS OF
THE RENEWAL OF THE LEASE CONTRACTS.
THE COURT OF APPEALS COMMITTED GRIEVOUS
REVERSIBLE ERROR OF LAW WHEN IT DISMISSED THE COMPLAINT FILED BY MARMAN WITH
THE
Our Ruling
The petition is without merit.
The petition essentially raises only
two issues for Our consideration because the second and third assignments of
errors are interrelated. The first
involves the procedural issue of whether or not the CA erred in not dismissing
the appeal of respondent PPI for failure to cite the page reference of the
original records in its appellate brief. The second is the substantive issue of whether
or not the CA erred in reversing the
We shall first deal with the
procedural issue.
Lack of page reference in the appellant’s brief is a
mere formal defect which does not warrant dismissal of the appeal; liberal
application of rules of procedure should be applied.
Marman argues that the CA should have
dismissed the appeal of petitioner outright because PPI’s appellate brief did
not make any page reference to the records or rollo of the case as required under Section 13, Rule 44 of the 1997
Rules of Civil Procedure.[29] Marman claims that the absence of the required
page reference rendered the appellate brief “nothing more than a pleading
filled with unsupported allegations and contentions.”[30] Marman insists on strict compliance with the
rules of procedure in accordance with the legal principle that an appeal is a
mere statutory privilege, which must be exercised only in accordance with law
or appropriate procedures.
Admitting the defect, PPI counters
that the absence of page reference in its appellant’s brief is a mere minor
procedural lapse which cannot result in the dismissal of its appeal. PPI asserts that dismissal based purely on
procedural technicalities is frowned upon and that rules of procedure should
not be applied in a very rigid and technical sense when it overrides
substantial justice. PPI prays for a
liberal construction of the rules of procedure.[31]
It is true that appeals are mere
statutory privileges which should be exercised only in the manner required by
law. To be sure, strict compliance with
rules of procedure is essential to the administration of justice. Nonetheless, technical rules of procedures are
mere tools designed to facilitate the attainment of justice. Their strict and rigid application should be
relaxed when they hinder rather than promote substantial justice. Cases should,
as much as possible, be resolved on the merits, not on mere technicalities. In Barnes
v. Padilla,[32] this
Court held:
Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflect this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter even that which this Court itself has already declared to be final x x x.
The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities. Time and again, this Court has consistently held that rules must not be applied rigidly so as not to override substantial justice.[33]
In this case, We
find that the procedural lapse committed is only minor and even negligible. It involves a mere formal defect of failure to
cite the page reference of the original records of the case in PPI’s appellant
brief. The defect is not even jurisdictional, such as failure to pay docket fee
or failure to appeal within the reglementary period. Marman did not
suffer any damage from the procedural lapse. The CA correctly exercised its sound
discretion in proceeding to rule on the merits of the appeal rather than
dismissing it on a mere formal defect.
We shall now resolve the meat of the
petition.
The CA did not err in ruling that PPI cannot be
compelled to execute a new contract of lease in favor of Marman.
Marman argues that the CA erred in
reversing the
PPI counters that there was no
perfected new lease contract because the parties failed to agree on all its
terms and conditions. It argues that a
plain and simple reading of the original contract reveals that the parties
intended a renewal to depend upon the parties’ agreement on all its terms and
conditions, not merely those pertaining to its commercial terms.[35] Since the parties failed to agree on all terms
and conditions of the new lease, PPI cannot be compelled to execute new lease
contracts in favor of Marman.
We agree with PPI. The crux of the petition lies in determining
whether the contracts of lease between PPI and Marman were, indeed, renewed. The resolution of the issue hinges on the
interpretation of the pertinent renewal provision of the lease contracts. Section 1 of the lease contracts provide:
The
LESSEE has the option to renew his leasehold interest in the leased premises
for an additional ten (10) years at the expiration of the term of his lease
under such terms and conditions as may be agreed upon by the parties provided
that the LESSEE shall give the LESSOR, prior to the expiration of the term of
the term of this Lease, 180 days notice, in writing, of his desire to procure
such new Lease.
The renewal of the original lease is
subject to “terms and conditions as may
be agreed upon by the parties.” The
stipulation is couched in general and mutual terms. It is clear that the
renewal of the lease is not automatic. The parties will still negotiate and
bargain on the terms and conditions of the new contract. These terms and
conditions are not specified. Thus, they may include commercial terms, such as
rent and escalation clause, as well as non-commercial terms such as covenants
to fix and repair the leased premises. The only term that cannot be negotiated
or bargained under the new contract is the period of renewal of the lease which
is fixed in the original lease at ten years. All other terms and conditions are subject to
negotiation.
While the original lease contracts
speak of “renewal,” what the parties actually intended was a new contract of
lease. This is evident from the words of
the Section 1 which speaks of a contract “under
such terms and conditions as may be agreed upon by the parties.” The contract is “renewed” only in the sense
that it is for the same period of ten years as that of the original lease
contract.
The clause “provided that the lessee shall give the lessor, prior to the expiration
of the term of this lease, 180 days notice, in writing, of his desire to
procure such new lease,” on the other hand, pertains to a condition for the
exercise of the option to renew. Simply
put, it is a requirement for the renewal of the lease. If no written notice is
given, PPI may assume that Marman has no more intention to renew the lease and
that the original contract will automatically terminate upon its expiration.
But mere notice by Marman to PPI does
not automatically result in a new lease contract. As stated, the parties will still negotiate
and agree on all terms and conditions of the new contract, except for the
period of the new lease which is fixed at ten years. In other words, the notice only triggers the
parties to negotiate on the terms and conditions of the renewal. If the parties fail to agree on all terms and
conditions of the new contract, there is no perfected new contract as between
them.
The evident intention of PPI and
Marman is for the new lease contract to be perfected only upon mutual agreement
on all terms and conditions of the new lease. This means that there must be an agreement on
both the commercial and non-commercial terms of the new lease contracts. This is clear from the general language of the
renewal clause. If the parties intended
differently, they could have simply deleted the phrase “under such terms and conditions as may be agreed upon by the parties,”
which would automatically renew the original contract for another period of ten
years upon mere notice to PPI. Alternatively,
they could have included a stipulation in the original lease contract which would
limit the terms and conditions that the parties may validly negotiate in order
for the contract to be renewed.
Here, records disclose that PPI and Marman did not agree on all terms of the new lease
contracts. PPI only accepted the counter
offer of PPI with respect to the commercial terms of the new lease. It did not accept the other non-commercial
terms and conditions of the new contract, specifically the repair of the middle
dock facility and the relocation of the sulfuric acid pipelines. The new lease contract was not perfected
because the parties did not agree on all terms of the lease. The CA correctly ruled that PPI cannot be
compelled to execute a new lease contract in favor of Marman.
Agreement on non-commercial terms of the lease is
essential to the perfection of the lease contracts; Marman is estopped from
claiming otherwise.
Marman is also estopped from claiming
that the non-commercial terms of the lease contract are not essential to the
perfection of the new lease contracts. Marman manifested to PPI in its letter of
Planters Products, Inc.
Planters Products Building
109 Esteban Street
Legaspi Village, Makati
Attention:
Mr. Llewellyn F. Fortuna
VP Finance and Treasurer
Re:
Matters discussed in the meeting on
Dear Mr. Fortuna:
In
connection with subject matter, we would like to confirm the outstanding items
which we discussed in our meeting last
1)
With regard to the relocation of ammonia bullet tank and Marman Trading’s
office which are both located near the proposed area to be leased out to PPI’s
new locator, we prefer that both the tank and office not be relocated since it
will totally disrupt our operations. More specifically, it is quite difficult
to cut the tank into several pieces for relocation. Thus, if possible, both tank and office
should be left in their present locations.
If this is not possible, the new lessee should be made to shoulder any
relocation costs.
x
x x x
6)
The
proposed relocation of both sulfuric acid and ammonia pipelines will be done
only after the renewal of the lease contracts.
7)
We
are going to address the issue of the repair and rehabilitation of the
middle-dock facilities. We have
already referred to you two (2) independent underwater surveyors/contractors
who are willing to undertake the repairs.
8)
We are already amenable to your proposed escalation rates and minimum volumes.
9) Upon reaching mutual agreement on all the
foregoing terms and conditions, you agree to renew the Lease Contracts for an
additional period of ten (10) years as mentioned and provided under our
existing Lease Contracts.[36]
(Emphasis supplied)
The letter of Marman to PPI is clear.
The new contract of lease is perfected
only upon agreement of all terms and conditions of the new contract, including
the relocation of the sulfuric and ammonia pipelines and the repair of the
middle dock facilities. The parties failed to reach any agreement on all terms
and conditions of the new lease contract.
Hence, no new lease was perfected as between them.
In A. Magsaysay, Inc. v. Cebu Portland Cement Co.,[37]
this Court stated:
x x x While Article 1319
of the new Civil Code prescribes that “consent is manifested by the meeting of
the offer and the acceptance upon the thing and the cause which are to
constitute the contract,” this rule does not apply to a situation where one or both parties consider that the
matters or details, in addition to the subject matter and the consideration,
should be stipulated and agreed upon. The
area of agreement must extend to all points that the parties deem material or
there is no contract. x x x[38]
In the recent case of Leonardo v. Court of Appeals,[39] this
Court reiterated:
The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the contract. The area of agreement must extend to all points that the parties deem material or there is no consent at all.[40] (Emphasis supplied)
WHEREFORE, the appealed Decision is AFFIRMED IN
SO ORDERED.
RUBEN T. REYES
Associate Justice
WE CONCUR:
MA. ALICIA
AUSTRIA-MARTINEZ
Associate Justice
Acting Chairperson
DANTE O. TINGA MINITA V. CHICO-NAZARIO
Associate Justice
Associate Justice
ANTONIO EDUARDO
B. NACHURA
Associate Justice
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
MA. ALICIA
AUSTRIA-MARTINEZ
Associate Justice
Acting Chairperson
Pursuant to Section 13, Article VIII of the
Constitution and the Division Acting Chairperson’s Attestation, I certify that
the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
Chief Justice
* Vice Associate Justice Consuelo Ynares-Santiago, Chairperson, who is on official leave per
Special Order No. 497 dated
**
Designated as additional member per Special Order No. 497
dated
[1] Rollo, pp. 39-59. Penned by Associate Justice Portia Aliño-Hormachuelos, with Associate Justices Mariano C. del Castillo and Magdangal M. de Leon, concurring.
[2] Id. at 201-207.
[3] Id. at 62-80.
[4] Id. at 63 & 71.
[5] Id. at 14 & 81.
[6] Id. at 14.
[7] Id. at 83-84.
[8] Id. at 85-86.
[9] Id. at 44.
[10] Id. at 405-406.
[11] Id. at 87-88.
[12] Id. at 95-112.
[13] Id. at 113-140.
[14] Id. at 141-164.
[15] Id. at 165-167.
[16] Id. at 201-207.
[17] Id. at 207.
[18] Id. at 205-206.
[19] Id. at 206.
[20] Id. at 208-210.
[21] Id. at 212.
[22] Id. at 39-59.
[23] Id. at 58-59.
[24] Id. at 51-53.
[25] Id. at 57-58.
[26] Id. at 293-303.
[27] Id. at 60-61.
[28] Id. at 20-21.
[29] Id. at 22.
[30] Id.
[31]
[32] G.R.
No. 160753,
[33] Barnes v. Padilla, id. at 541.
[34] Rollo, pp. 25-26.
[35] Id. at 431-436.
[36]
[37] 100 Phil. 351 (1956).
[38] A. Magsaysay, Inc.
v.
[39] G.R.
No. 125485,
[40] Leonardo v. Court of Appeals,
id. at 205.