[G.R. No. 126850.
THE INSULAR LIFE Assurance Co. vs. CA
SECOND DIVISION
Quoted hereunder, for your information, is a resolution of this
Court dated
G.R. No. 126850 (The Insular Life Assurance Company, Ltd. vs. Court of Appeals and Sun Brothers and Company.)
Subject for resolution is the Motion for Reconsideration dated
WHEREFORE, the assailed Decision, dated May 20, 1996, of the Court
of Appeals in CA-G.R. CV No. 46987 is REVERSED and SET ASIDE. In lieu thereof,
judgment is rendered ordering respondent Sun Brothers and Company to pay
petitioner Insular Life Assurance Company, Ltd. actual damages in the amount of
Five Hundred Thousand Pesos (P500,000.00) monthly, representing the unrealized
monthly income of petitioner or P6 Million a year from
Double costs against private respondent.
SO ORDERED.[1]
Respondent raises three grounds in its Motion for Reconsideration, to wit:
I
THE AWARD OF P500.000.00 MONTHLY RENTALS IN THE FORM OF ACTUAL DAMAGES CANNOT BE VALIDLY DONE WITHOUT VIOLATING THE SETTLED RULE THAT THE COURT CANNOT MAKE A CONTRACT FOR THE PARTIES.
II
THE TAKING OF JUDICIAL NOTICE THAT P500,000.00 IS THE REASONABLE MONTHLY RENTAL OF THE LEASED PREMISES IS NOT SUPPORTED BY FACTS OF PUBLIC NOTORIETY THAT P500,000.00 IS THE PREVAILING RENTALS OF SIMILARLY-SITUATED LEASED PREMISES IN THE AREA.
III
PRIVATE RESPONDENT
CANNOT BE HELD LIABLE FOR EXEMPLARY DAMAGES, ATTORNEY'S FEES AND DOUBLE COST OF
THE SUIT IN THE ABSENCE OF EVIDENCE OF BAD
Respondent alleges that the award of P500,000.00 monthly rentals as actual damages is an indirect way of violating the rule that the Court cannot make the contract for the parties. It submits that by fixing the amount of P500,000.00 monthly rentals as actual damages, the Court effectively made the contract for the parties. Moreover, it claims that there is no direct evidence that petitioner is receiving a monthly rental of P600,000.00 from the other property which it claimed was being rented by Winsome Development Corporation. Respondent further argues that the fixing of P500,000.00 as reasonable monthly rental of the leased premises through judicial notice cannot be done without a hearing called for the purpose. It claims that reasonable monthly rental is not among the mandatory matters which the Court can take judicial notice of. Lastly, respondent claims that it should not be held liable for exemplary damages, attorney's fees and double costs of the suit because it instituted in good faith the case for Declaratory Relief.
We are not persuaded.
There is no inconsistency between our ruling that the Court cannot rewrite the contract for the parties and our award of actual damages in the present case. Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the obligee fails to obtain. In other words, lucrum cessans is also a basis for indemnification. Uncertainty as to whether or not a claimant suffered unrealized profits at all — i.e., uncertainty as to the very fact of injury — will, of course, preclude recovery of this species of damages. Where, however, it is reasonably certain that injury consisting of failure to realize otherwise reasonably expected profits had been incurred, uncertainty as to the precise amount of such unrealized profits will not prevent recovery or the award of damages.[3] The problem then would be the ascertainment of the amount of such unrealized profits. Thus, the question that arises is: Has petitioner failed to make profits because of respondent's breach of contract and, in the affirmative, is there any basis for determining with reasonable certainty such unearned profits? We answered both questions in the affirmative. Thus, we clearly held that the award of actual damages was made for profits which petitioner failed to obtain due to the prolonged litigation. We said:
However, the Court cannot validly impose said amount on Sun
Brothers as monthly rental since it was not agreed upon by the parties. It is
not the province of the Court to make a contract for the parties or bind parties
to one when no consensual agreement was entered into. But the amount of
P500,000.00 a month since 1992 or P6 Million a year, can be considered actual
or compensatory damages in the form of unrealized monthly income for Sun
Brothers' continued occupation and enjoyment of the leased property. This is in consonance with Producers Bank of
the
. . . There are two kinds of actual or compensatory damages: one is the loss of what a person already possesses, and the other is the failure to receive as a benefit that which would have pertained to him x x x. In the latter instance, the familiar rule is that damages consisting of unrealized profits, frequently referred as "ganacias frustradas" or "lucrum cessans,' are not to be granted on the basis of mere speculation, conjecture, or surmise, but rather by reference to some reasonably definite standard such as market value, established experience, or direct inference from known circumstances.[4]
Contrary to respondent's assertion, the Court had sufficient basis in its estimation of petitioner's unrealized profits. Our estimation of expected profits as actual damages was based not only in the Contract of Lease between petitioner and Winsome Development Corporation dated March 30, 1993 which fixed the monthly rental for the first year, starting December 1992, at P600,000.00, with corresponding increases thereafter,[5] but also on the testimony of the appraiser, Executive Vice President, Engr. Oliver Morales, of the Cuervo Appraisers, Inc.[6] and the latter's Appraisal Report which estimated the fair rental value of the subject leased property at P700,000.00 as of October 30, 1991.[7]
Neither is there truth to respondent's allegation that the Court fixed the amount P500,000.00 as reasonable monthly rental of the leased premises through judicial notice. The amount of P500,000.00 was considered as reasonable expected unrealized profits. We simply held that the general increases in rentals of lease contract renewals especially in business establishments can be reasonably expected; monthly rentals cannot be expected to be fixed considering that land valuation increases over time, more especially in a commercial district such as Makati City. It is worthwhile to note that during the duration of the original and renewal contracts Makati was then a municipality, it was converted into a city by virtue of Republic Act No. 7854, otherwise known as "The Charter of the City of Makati", which was approved on July 19, 1994. Naturally, along with its conversion into a city comes the considerable increase in property valuation. Therefore, it is reasonable to expect that petitioner would receive a monthly rental of at least P500,000.00 for its prime property.
As to the awards for exemplary damages, attorney's fees and double costs, we reiterate that the same is in order since respondent was in evident bad faith when in the course of negotiations for the third renewal of the lease contract in 1992, it wantonly and oppressively insisted that it had a unilateral right to renew to lease thereby resulting in an impasse between the parties and which respondent took advantage of and used as a basis for instituting the proceedings for declaratory relief, although its prior actions since January 29, 1958 when the original contract of lease was executed, spanning more than three decades, indicated that it was well-aware of the contractual stipulation that after a twenty-year period of lease, the right to renew the lease was subject to such terms and conditions that the parties may mutually agree upon at the time, as expressly provided for in the original contract of lease. The award of exemplary damages is warranted by way of example and correction for the public good[8] and also to serve as a deterrent to the commission of similar misdeeds by others. As to the award of attorney's fees and double costs, the same is proper in view of the award of exemplary damages.[9] In addition, we said that the award is proper since petitioner was compelled to incur expenses to protect its interest by reason of an unjustified and unfounded insistence of petitioner on an alleged unilateral right to renew the lease.[10]
WHEREFORE, respondent's Motion for Reconsideration is DENIED for lack of merit, with FINALITY.
SO ORDERED.
Very truly yours,
(Sgd.) LUDlCHI YASAY-NUNAG
Clerk of Court
[1]
Decision promulgated on April 28, 2004, pp. 22-23; Rollo, pp. 233-234.
[2] Rollo, pp. 263-264.
[3] Talisay-Silay Milling Co., Inc. vs. Asociacion de Agricultores de Talisay-Silay, Inc., 247 SCRA 361,381 (1995).
[4] Decision promulgated on April 28, 2004, pp. 17-18; Rollo, pp. 228-229.
[5] Original Record, p. 303.
[6] TSN, Testimony of Engr. Oliver Morales, October 6, 1992.
[7] Original Record, p. 287.
[8] Article 2229 of the Civil Code.
[9] Article 2208 of the Civil Code.
[10] Ibid.