FIRST DIVISION
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DANIEL T. SO, Petitioner, |
G.R. No. 183628 |
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-versus- |
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FOOD FEST LAND, INC. |
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Respondent |
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x------------------------------------------x |
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FOOD FEST LAND, INC., Petitioner, -versus- |
G.R. No. 183670 Present: PUNO, C.J., Chairperson,
CARPIO MORALES, LEONARDO-DE CASTRO, BERSAMIN, |
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DANIEL T. SO, Respondent. |
VILLARAMA, JR., JJ. Promulgated: April 7, 2010 |
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D E C I S I O N
CARPIO
MORALES, J.
Food
Fest Land Inc. (Food Fest) entered into a
which Food Fest intended to operate a Kentucky Fried Chicken carry out branch.
Before
forging the lease contract, the parties entered into a preliminary agreement dated
The lease shall not become binding upon us unless and until the government agencies concerned shall authorize, permit or license us to open and maintain our business at the proposed Lease Premises. We shall promptly make an application for permits, licenses and authority for our business and shall exercise due diligence to obtain it, provided, however, that you shall assist us by submitting such documents and papers and comply with such other requirements as the governmental agencies may impose. We shall give notice to you when the permits, license and authorities have been obtained. We shall also notify you if any of the required permits, licenses and authorities shall not be be (sic) given or granted within fifteen days (15) from your conform (sic)hereto. In such case, the agreement may be canceled and all rights and obligations hereunder shall cease.[2] (underscoring supplied)
While
Food Fest was able to secure the necessary licenses and permits for the year
1999, it failed to commence business operations. For the year 2000, Food Fest’s application for
renewal of barangay business clearance was
“held in abeyance until further study of [its] kitchen facilities.”[3]
As
the barangay business clearance is a prerequisite to the processing of other
permits, licenses and authority by the city government, Food Fest was unable to
operate. Fearing further business
losses, Food Fest, by its claim, communicated its intent to terminate the lease
contract to So who, however, did not accede and instead offered to help Food
Fest secure authorization from the barangay. On So’s advice, Food Fest wrote requests addressed
to city officials for assistance to facilitate renewal.
In
August 2000, Food Fest, for the second time, purportedly informed So of its intent
to terminate the lease, and it in fact stopped paying rent.
So
later sent a
By
letter of P123,200.00.
Food Fest denied any liability, however, and started to remove its fixtures and
equipment from the premises.
On
On
Branch 64 of the MeTC, by Decision of
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against defendant, Food Fest Land, Inc., as follows:
a. Ordering the defendant to pay the unpaid rentals from August 2000 until March 2001 with penalties accrued thereon. The security deposit in the sum of Sixty Four Thousand Pesos (Php64,000.00) is forfeited in favor of the plaintiff;
b. Ordering the defendant to pay liquidated damages in a sum equivalent to 25% of the total sum due and demandable;
c. Ordering the defendant to pay the plaintiff a sum equivalent to 25% of the total claim as and for attorney’s fees; and
d. The costs of suit.
SO ORDERED.[8]
On
appeal, Branch 143 of the Regional Trial Court (RTC), by Decision of
WHEREFORE, premises considered, the
judgment of the lower court dated P32,000.00) as reimbursement for rentals paid for the
months of July and August 2000; Twenty Thousand Pesos (P20,000.00) as
exemplary damages; Twenty Thousand Pesos (P20,000.00) as attorney’s fees
and costs of suit.
SO ORDERED.[10]
In
reversing the MeTC, the RTC found that Food Fest already vacated the leased
premises before So filed the complaint for ejectment; and whereas possession is
the only issue for resolution in an ejectment case, So’s cause of action only
pertained to collection of the rental arrears.
As
to So’s claim for payment of arrears, the RTC noted that since the claim
exceeded the jurisdictional amount over which it can cognize, the RTC, applying
Sec. 8, Rule 40 of the Rules of Court,[11]
treated the case as if it was originally filed with it.
On the merits, the RTC held that Food
Fest’s failure to secure the authority to commence business operations resulted
in the termination of its contractual obligations to So, including the
obligation to pay rent.
On
petition for review, the Court of Appeals, by Decision of
WHEREFORE, premises considered, the assailed decision dated November 30, 2006 of the RTC, Branch 143, Makati City is hereby REVERSED and SET ASIDE, ordering respondent FFLI to pay petitioner Daniel T. So the following:
1.
Unpaid rentals from August 2000 until
2. Temperate damages in the amount of P50,000.00;
3. P20,000.00 as attorney’s fees; and
4. Costs of suit.
SO ORDERED.[13]
The
parties’ respective motions for reconsideration having been denied, they filed
their respective petitions before this Court which, by Resolution of October 6,
2008, resolved to consolidate G.R. No. 183628 (Daniel T. So vs. Food
Fest Land, Inc.) with G.R. No. 183670 (Food Fest Land, Inc. vs.
Daniel T. So).
So
maintains that the MeTC had jurisdiction over his complaint for ejectment. For, So contends, Food Fest did not vacate the
leased premises before his filing (on
So admitted in his Complaint,
however, that Food Fest started pulling out equipment and other machineries
from the premises even before the
final notice was received by it on
13. In or the
last few days of March 2001, defendant FOOD FEST LAND, INC. started
to remove and pull out its equipment, appliances, fittings, furnishings,
movable articles and other accessories and facilities that it had earlier
placed and installed in the leased premises, but due to its wanton lack of
care in doing so, so much damage and destruction was caused to the leased
premises, resulting in the breakage of and damage to the concrete walls and
partition in the building as well as the steel gate leading to the leased
premises and other parts of the building and its premises.[14]
(emphasis and underscoring supplied)
Two
elements are paramount in possession – there must be occupancy, apprehension or
taking, and there must be intent to possess.[15] In the present case, given the immediately
quoted allegation-admission of So, intent to possess was not present on Food
Fest’s part.
In
another vein, So claims that Food Fest did not exercise care in removing the
installations and fixtures, thereby causing destruction to the premises to thus
entitle him to damages, as well as to damages corresponding to unrealized
profits (lucrum cessans) to answer for the period during which the unit was
not rented out.
Unrealized profits fall under the
category of actual or compensatory damages. If there exists a basis for a
reasonable expectation that profits would have continued to be generated had
there been no breach of contract, indemnification for damages based on such
expected profits is proper. This is,
however, subject to the rule that a party is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly
proved.[16]
Other than the photographs evincing
damage to the premises, no evidence was proffered to show So’s entitlement to
unrealized profits. That the leased unit was not subsequently leased is not
solely attributable to Food Fest. As borne by the records, no renovation was
undertaken by So for almost three years following Food Fest’s vacation of the
premises in 2001. The quotations issued by construction companies for purposes
of renovation were issued only in 2004.
So is not without recourse under the
lease contract, however. Thus the
pertinent provisions of the lease contract provide:
7. LIABILITY OF LESSEE FOR DAMAGES- LESSEE hereby agrees that any damage to the leased premises or its appurtenances caused by said LESSEE or its agents, employees, customers, guests or any other person without the fault of LESSOR shall be LESSEE’s sole responsibility and liability, which damage shall, upon demand by LESSOR be repaired promptly at its expense.
16. TERMINATION OF THE LEASE- LESSEE agrees to return and surrender the leased premises at the expiration of the term of this lease in as good condition as reasonable wear and tear will permit and without delay whatsoever, devoid of all occupants, furniture, machinery, equipment and signages, articles and effects of any kind, other than such alterations or improvements which cannot be removed without damaging the leased premises.
23. PENALTY CLAUSE – Any and all accounts payable by LESSEE under this Contract of Lease and other charges which may be claimed against LESSEE, but not paid by LESSEE to LESSOR within fifteen (15) days from due date shall be subject to penalty charges of ONE PERCENT (1%) per month from due date until the account is paid in full.
23.1. Should LESSOR be compelled to seek judicial relief against LESSEE the latter shall, in addition to any other claim for damages pay as liquidated damages to LESSOR an amount equivalent to twenty-five percent (25%) of the amount due, but in no case less than P500.00: and an attorney’s fee in the amount equivalent to 25% of the amount claimed but in no case less than P3,000.00 as well as all expenses of litigation.[17]
Respecting
So’s claim for renovation expenses, the same must be denied absent proof as to
the actual cost of renovation. Only firm offers or quotations from construction
companies are in the records. Following Article
2224 of the Civil Code,[18]
however, the appellate court’s award of temperate damages is in order.
This
Court notes that the appellate court did not award liquidated damages in
contravention of the contract. As for
the appellate court’s award of P20,000.00 as attorney’s fees, the
contractual stipulation should prevail.
As
for Food Fest’s invocation of the principle of rebus sic stantibus as
enunciated in Article 1267 of the Civil Code to render the lease contract functus
officio, and consequently release it from responsibility to pay rentals, the
Court is not persuaded. Article 1267 provides:
Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
This
article, which enunciates the doctrine of unforeseen events, is not,
however, an absolute application of the principle of rebus sic stantibus, which
would endanger the security of contractual relations. The parties to the contract must be presumed
to have assumed the risks of unfavorable developments. It is, therefore, only in absolutely
exceptional changes of circumstances that equity demands assistance for the
debtor.[19]
Food
Fest claims that its failure to secure the necessary business permits and
licenses rendered the impossibility and non-materialization of its purpose in
entering into the contract of lease, in support of which it cites the earlier-quoted
portion of the preliminary agreement dated
The
cause or essential purpose in a contract of lease is the use or enjoyment of a
thing.[21] A
party’s motive or particular purpose in entering into a contract does not
affect the validity or existence of the contract; an exception is when the
realization of such motive or particular purpose has been made a condition upon
which the contract is made to depend. The exception does not apply here.
It
is clear that the condition set forth in the preliminary agreement pertains to
the initial application of Food Fest for the permits, licenses and authority to
operate. It should not be construed to
apply to Food Fest’s subsequent applications. Consider the following
qualification in the preliminary agreement:
xxx We shall also notify you if any of the required permits, licenses and authorities shall not be be (sic) given or granted within fifteen days (15) from your conform (sic) hereto. In such case, the agreement may be canceled and all rights and obligations hereunder shall cease.[22] (underscoring supplied)
Food
Fest was able to secure the permits, licenses and authority to operate when the
lease contract was executed. Its failure
to renew these permits, licenses and authority for the succeeding year,
does not, however, suffice to declare the lease functus officio, nor can it be construed as an
unforeseen event to warrant the application of Article 1267.
Contracts,
once perfected, are binding between the contracting parties. Obligations
arising therefrom have the force of law and should be complied with in good faith.
Food Fest cannot renege from the obligations it has freely assumed when it
signed the lease contract.
WHEREFORE,
the Court of Appeals Decision of
Food Fest is ORDERED to pay So
liquidated damages in the amount equivalent to 25% of the total sum due and
demandable. Further, So is ORDERED to pay attorney’s fees in the amount
equivalent to 25% of the total sum due and demandable. In all other respects,
the decision is AFFIRMED.
SO
ORDERED.
CONCHITA
CARPIO MORALES
Associate Justice
WE CONCUR:
REYNATO S.
PUNO
Chief Justice
Chairperson
|
TERESITA J.
LEONARDO-DE CASTRO Associate Justice |
LUCAS P. BERSAMIN Associate Justice |
MARTIN S.
VILLARAMA, JR.
Associate
Justice
CERTIFICATION
Pursuant to
Section 13, Article VIII of the Constitution, 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
[1] CA rollo, pp. 34-42
[2]
[3] Rollo, Vol. II, p. 85.
[4]
[5] CA rollo, p. 49.
[6]
[7]
[8]
[9]
[10]
[11] Sec. 8. Appeal from orders dismissing case without trial; lack of jurisdiction. – x x x
If the case was tried on the merits by the lower court without jurisdiction over the subject matter, the Regional Trial Court on appeal shall not dismiss the case if it has original jurisdiction thereof, but shall decide the case in accordance with the preceding section, without prejudice to the admission of amended pleadings and additional evidence in the interest of justice.
[12] Penned by Associate Justice Remedios A. Salazar-Fernando with the concurrences of Associate Justices Rosalinda Asuncion-Vicente and Sesinando E. Villon, rollo, Vol. II, pp. 42-56.
[13]
[14] Records, Vol. I, pp. 3-4.
[15] Yu v. Pacleb, G.R. No. 130316, Janaury 24, 2007, 512 SCRA 402, 407.
[16] Civil Code, Art. 2199.
[17] CA rollo, pp. 34-42.
[18] CIVIL CODE, Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.
[19] PNCC v. Court of Appeals, G.R.
No. 116896.
[20] Vide note 2.
[21] Supra Note 19.
[22] CA rollo, p. 33