DANIEL T. SO,
G.R. No. 183628
FOOD FEST LAND, INC.
FOOD FEST LAND, INC.,
G.R. No. 183670
PUNO, C.J., Chairperson,
DANIEL T. SO,
VILLARAMA, JR., JJ.
April 7, 2010
D E C I S I O N
CARPIO MORALES, J.
Fest Land Inc. (Food Fest) entered into a
which Food Fest intended to operate a Kentucky Fried Chicken carry out branch.
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. (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 Fests application for renewal of barangay business clearance was held in abeyance until further study of [its] kitchen facilities.
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 Sos 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.
later sent a
Food Fest denied any liability, however, and started to remove its fixtures and
equipment from the premises.
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 attorneys fees; and
d. The costs of suit.
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 attorneys fees
and costs of suit.
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, Sos cause of action only pertained to collection of the rental arrears.
As to Sos 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, treated the case as if it was originally filed with it.
On the merits, the RTC held that Food Fests 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.
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:
Unpaid rentals from August 2000 until
2. Temperate damages in the amount of P50,000.00;
3. P20,000.00 as attorneys fees; and
4. Costs of suit.
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).
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. (emphasis and underscoring supplied)
Two elements are paramount in possession there must be occupancy, apprehension or taking, and there must be intent to possess. In the present case, given the immediately quoted allegation-admission of So, intent to possess was not present on Food Fests 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.
Other than the photographs evincing damage to the premises, no evidence was proffered to show Sos 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 Fests 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 LESSEEs 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 attorneys 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.
Respecting Sos 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, however, the appellate courts award of temperate damages is in order.
Court notes that the appellate court did not award liquidated damages in
contravention of the contract. As for
the appellate courts award of
P20,000.00 as attorneys fees, the
contractual stipulation should prevail.
As for Food Fests 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.
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. A partys 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 Fests 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. (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.
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 attorneys fees in the amount equivalent to 25% of the total sum due and demandable. In all other respects, the decision is AFFIRMED.
CONCHITA CARPIO MORALES
REYNATO S. PUNO
TERESITA J. LEONARDO-DE CASTRO
LUCAS P. BERSAMIN
MARTIN S. VILLARAMA, JR.
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 Courts Division.
REYNATO S. PUNO
 CA rollo, pp. 34-42
 Rollo, Vol. II, p. 85.
 CA rollo, p. 49.
 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.
 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.
 Records, Vol. I, pp. 3-4.
 Yu v. Pacleb, G.R. No. 130316, Janaury 24, 2007, 512 SCRA 402, 407.
 Civil Code, Art. 2199.
 CA rollo, pp. 34-42.
 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.
 PNCC v. Court of Appeals, G.R.
 Vide note 2.
 Supra Note 19.
 CA rollo, p. 33