ANDREE ABRIAM PLAINTIFF-APPELLEE, VS. FRANCIS A. JUAN DEFENDANT-APPELLANT.
LOPEZ, J.:
WHEREFORE, premises considered, judgment is hereby rendered against the defendant declaring him liable to pay variable rentals under the Contract of Lease. Defendant is hereby ordered to pay the plaintiff the following sum of:
a) P1,352,409.93 plus 6% interest from date of filing of the complaint, as total variable rent due for the years 2002 to 2006;
b)P29,403 as litigation expenses, and
c) P20,000.00 as attorney’s fees; and
to pay the cost of the suit.
SO ORDERED.
FACTS
The genesis of this case is the complaint filed by Appellee Andree Abriam (hereinafter “Abriam”) against appellant Francis A. Juan (hereinafter “Juan”).
In his complaint, Abriam alleges the following set of facts:
On 20 August 2002, appellee Abriam and appellant Juan entered into a Contract of Lease for a period of five (5) years commencing on 1 October 2002 until 30 September 2007. Juan leased the property of Abriam with an area of 331 square meters situated at Boracay Island, Barangay Balabag, Malay, Aklan.
Section 4.01, Article IV, paragraph 3, of the said Contract of Lease provides:
“After the LESSEE has fully commenced its operation, the LESSOR shall also be entitled to a variable rent of five percent (5%) of the sales of the LESSEE at the Leased Premises, after deduction of the service charge and all government sales taxes thereon, and which variable rental shall be payable every first week of each month.”
According to appellee, Juan fully operated his bar and restaurant under the business name “PIER ONE BORACAY CORPORATION” from October 2002 up to September 2007. He alleges that since the start of Juan’s operations on October 2002, appellant has never paid the variable rent stipulated in the lease contract.
Appellee further alleges that according to available records, appellant’s gross sales, from the time he started full operation over the leased premises, up to the year 2006 is P35,129,222.53. This amount excludes his gross sales from January 2007 to September 2007.
Based on the applications for Renewal of business permit[2] filed by appellant Juan with the Municipal Government of Malay, and the government taxes due thereon, the following figures are hereunder shown:
Year Gross
SalesMunicipal
TaxesBIR
TaxesService
ChargeNet after gov’t.
tax paid &
service
charge2002 P505,800.24 P16,206.00 P60,696.03 P50,580.03 P378,318.18 2003 P5,013,889.52 P105,295.00 P601,666.75 P501,388.95 P3,805,538.82 2004 P10,174,830.30 P66,880.44 P1,220,979.64 P1,017,483.03 P7,869,487.19 2005 P11,460,576.64 P92,923.78 P1,375,269.20 P1,146,057.67 P8,846,325.99 2006 P7,974,125.83 P71,289.80 P956,895,10 P797,412.59 P6,148,528.34 Total: 35,129,22.53 352,595.02 4,215,506.70 3,512,922.2 27,048,198.52
Pursuant to the Contract of Lease, Abriam is entitled to five percent (5%) of the gross sales after deduction of the service charge and all government taxes. This amount is supposed to be payable to Abriam every first week of each month.
Appellee maintains that based on the abovementioned gross sales less government and service charges, the total variable rent payable to him is P1,352,409.93 which is five percent (5%) of P27,048,198.52. According to him, he is also entitled to an additional amount of variable rent representing the sales from January 2007 up to September 2007. Nevertheless, the additional variable rent for the said period cannot yet be determined with accuracy at the time of the filing of the complaint since the records of the sales are in the possession of appellant Juan.
Despite repeated verbal and written demands, the latest of which was the demand letter[3] dated 15 June 2007, Juan failed and/or refused to pay Abriam the abovementioned five percent (5%) variable rent agreed upon to the damage and prejudice of appellee Juan.
As a consequence of the obstinate and unjustifiable refusal or failure of appellant Juan to pay the afore-stated amount, Abriam was constrained to file this case and engage the services of counsel in the sum of P20,000.00 as attorney’s fees plus P2,500.00 for every court appearance. He also incurred litigation expenses amounting to not less than P10,000.00. He also maintains that due to the non-payment of the variable rent, appellant should be required to pay the corresponding legal interest of 12% per annum of the variable rent as penalty for depriving appellee the said rent for more than four (4) years.
On the other hand, appellant Juan claims that he does not maintain a business address at Pier 1 Boracay Island, Malay, Aklan and he does not operate a bar and restaurant business under the business name Pier one Boracay Corporation. The Corporation is a domestic corporation duly registered with the Securities and Exchange Commission with its own juridical personality, separate and distinct from that of the defendant-appellant. “Pier One Boracay Corporation” operates the bar and restaurant business, not appellant Juan.
According to appellant, appellee Abriam, in contravention of the Contract of Lease, is insisting on the collection of variable rent using as basis the gross sales of “PIER ONE BORACAY CORPORATION”, an entity separate and distinct from appellant. He also maintains that the permit to Engage in Business, Trade or Occupation Numbers 0700, 3597, 173 and 4822[4] do not pertain to the gross sales of appellant. Instead, said applications show the gross sales of “PIER ONE BORACAY CORPORATION”
Appellant alleges that as a consequence of the malicious filing by appellee of this suit, he suffered moral shock, besmirched reputation, wounded feelings and serious anxiety which must perforce entitle him to moral damages in the amount of not less than P500,000.00, exemplary damages in the amount of not less than P500,000.00, attorney’s fess of P250,000.00, plus an appearance fee of P10,000.00 for every court hearing to be attended.
During pre-trial[5], the parties admitted that there is a Contract of Lease between them. They also admitted that it is “Pier One Boracay Corporation” that conducted business in the subject leased premises.
Hence this appeal.
ISSUES
Appellant raises the following issues for our consideration:
I.
THE LOWER COURT GRAVELY ERRED WHEN IT RESOLVED THE CASE NOT ON THE PREPONDERANCE OF PLAINTIFF-APPELLEE’S EVIDENCES BUT ON THE WEAKNESS OF DEFENDANT-APPELLANT’S EVIDENCE.II.
THE LOWER COURT GRAVELY ERRED WHEN IT AWARDED PHP1,352,409.93 PLUS 6% INTEREST AS THE TOTAL VARIABLE RENT DUE FROM 2002 TO 2006.III.
THE LOWER COURT ERRED WHEN IT AWARDED LITIGATION EXPENSES, ATTORNEY’S FEES AND COST OF THE SUIT.
OUR RULING
Appellant maintains that the burden of proof has not been overcome by the appellee. According to him the trial court’s findings were based on circumstantial evidence.
We disagree.
In this case, we find that appellee Abriam was able to prove his claim against appellant Juan by a preponderance of evidence. Appellant is therefore liable to pay the variable rent.
We cannot give credence to appellant’s contention that it was Paul Sanchez, in his personal capacity as franchisee of Pier One Bar and Grill Holding Corporation, who actually conducted business on the leased premises. The applications for business permit[6] (Exhibits “B”, “C”, “D”, “E”, and “F”) clearly shows the following: (1) it was appellant Juan who filed the applications; (2) licenses were issued in the name of appellant Juan; (3) the business name was Pier One Boracay Corporation; (4) the business conducted in the leased premises was a bar and restaurant; and (5) the owner/manager of the business was appellant himself. Nowhere in the applications submitted to the local government of Malay, Aklan does the name of Paul Sanchez appear as applicant or owner of the business conducted in the leased premises. While the name of Paul Sanchez appears at the tail end of the applications for the year 2006[7] and 2007[8], his name appears beside the preposition “by” and above the name of Francis Juan. The use of the preposition “by” indicates that Paul Sanchez acted for and in behalf of appellant. Furthermore, in the application filed on the 10th of January 2005 (Exhibit D)[9], it was appellant Juan himself who signed the dorsal portion as the applicant.
Appellant’s defense is further belied by the lack of evidence to show that Pier One Boracay Corporation is indeed a duly registered corporation under Philippine laws. While during pre-trial[10], it was stipulated by the parties that “Pier One Boracay Corporation” conducted business in the leased premises, no proof was presented to prove that Pier One Boracay Corporation is a corporation duly registered under Philippine law. No evidence has been put forward by the appellant to show the corporation’s registration with the Securities and Exchange Commission (SEC). When there is no legal organization of a corporation, the association of a group of men for business or other endeavors does not absorb the personality of the group and merge it into the personality of another separate and independent entity which is not given corporate life by the mere formation of the group. Such conglomeration of persons is incompetent to act as a corporation, cannot create agents, or exercise by itself authority in its behalf.[11] Basic is the rule that it is only through incorporation and registration that corporations can acquire juridical personality under the Corporation Code.[12] It is only upon the approval and issuance of a certificate of incorporation by the SEC that the applicant corporation becomes a juridical person.[13]
Here, even if we were to believe appellant, that a different entity – Pier One Boracay Corporation conducted business in the leased premises, he would be liable for breach of contract since by doing so he violated Section 3.02[14] of the Lease Contract which provides that the lessee is only allowed to sublease the subject property only after the lessor gives his consent. In any case, he never sought permission from the Appellee that he will sublease the subject property because apparently there was no such intention in the first place.
Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.[15] Neither party may unilaterally and upon his own exclusive volition, escape his obligation under the contract, unless the other party assented thereto, or unless for causes sufficient in law and pronounced adequate by a competent tribunal.[16] Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage, and law.[17]
Thus, the trial court was correct when it ruled that “in the end, it does not matter after all whether there was a corporation “Pier One Boracay Corporation”, whether the defendant was the owner, or manager or a mere employee of the corporation; whether Paul Sanchez is the franchisee of Pier one Bar and Grill Holding Corporation; or whether as franchisee, Paul Sanchez is the owner, manager, and/or operator of “Pier One Boracay Corporation” to the exclusion of the defendant – for in any which way, defendant could either be held liable under his contractual obligation to pay the variable rent, or in the same measure, to pay damages for his failure to observe good faith in compliance therewith.[18]
Moreover, Paul Sanchez’s claim that he leased the subject property from the appellant on the basis of a gentleman’s agreement was not substantiated nor corroborated. The testimony of appellant’s witness, David Cervantes, fails to persuade, since he testified that he was only told by someone that Pier One Boracay was a corporation, and that he was also only told by someone that Paul Sanchez was a franchisee of Pier One Boracay.[19] David Cervantes never saw the Articles of Incorporation, nor did he ever see the supposed franchise agreement between appellant Juan and Paul Sanchez. In Cervantes’ own words, he had no personal knowledge.[20]
Even if such gentleman’s agreement did in fact exist, the trial court correctly found that such is not binding on the appellee. As earlier discussed, such agreement violated the express provision of the contract of lease, and would prejudice appellee’s right under the lease contract.
There is no reason to doubt the veracity of the applications for business permit as the proper bases for computing the amount of variable rent due to the appellee. These documents are of public record and considered as public documents.
The applications for business permit are considered as public documents since they have been filed with a government office. Public documents are admissible in evidence even without further proof of their due execution and genuineness.[21] Alicia N. Manlabao, local revenue collection officer and in-charge of the business permit and licensing section of the local government of Malay, Aklan attested that the applications were faithful reproductions of the original which are in the possession of the appellant, and which the appellant has even used as part of his exhibits.[22] The trial court correctly found that it is of no moment that the data were merely culled from the Applications for Permit to Engage in Business, Trade or Occupation, and that these data are without the personal knowledge of the plaintiff or even of the local revenue collection officer who was in-charge of the business permit and licensing section of the LGU of Malay. Furthermore, the dates in these applications were submitted by the appellant himself or his authorized representative. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated.[23] All other public documents are evidence, even against a third person, of the fact which gave rise to their execution and of the date of the latter.[24]
While appellant questions how appellee arrived at the amount of variable rent he owes the latter, he failed to present controverting evidence that would show the correct amounts. Thus, absent any proof to the contrary, we find that appellee Abriam has proven his claim by a preponderance of evidence. All told, the evidence preponderates in favor of the appellee for preponderance of evidence means probability of truth. It is evidence that is more convincing to the court as worthy of belief than that which is offered in opposition thereto.[25]
Thus, based on the data culled from the applications for business permit[26], the trial court correctly ruled that the total variable rent owed by the appellant amounts to P1,352,409.93.
Incongruence on address of the demand letter.
Appellee next argues that the plaintiff-appellee failed to establish the delay after demand. He avers that the variable rent is due every first week of each month, while the appellee only filed a case against him on 26 September 2007 after the expiration of the contract of lease. According to him the credibility of the witness is greatly affected when it waited for five years or after the contract of lease has expired before the case was filed in court. This mirrors the absence of the oral demand from the appellee.
Mere delay in demanding for the monthly payment of the variable rent did not automatically transform the right of the plaintiff into a stale demand that would bar him from recovering variable rent by reason of laches. Section 9.01 of the lease contract expressly states:
“The failure of a Party to insist upon a strict performance of any of the terms, conditions, and covenants hereof shall not be deemed a relinquishment or waiver of any term or remedy that such Party may have nor shall it be construed as a waiver of any subsequent breach or default of the terms, conditions and covenants which shall [sic] to be in full force and effect. No waiver by a Party of any of its rights under this Contract shall be deemed to have [sic] made unless expressed in writing and signed by the said party.”
Also worthy to note is the fact that appellant did not controvert appellee’s testimony that the latter made several oral demands on the former to pay the variable rents every time they see each other since he was out of the country for years, and the appellant would tell him that he would pay in lump sum at the end of the contract. It was due to the appellant’s failure to pay that appellee was compelled to file this case.
He also points out that the written demand to pay was addressed to Mr. Francis Juan at 221 General Segundo Street, Brgy. San Antonio Pasig City, while the address of Mr. Francis Juan as indicated in the Contract of Lease was 22-I General Segundo Street, Brgy. San Antonio, Pasig City. Consequently, the demand letter was not received by the addressee himself, but by a certain Mr. Frank Santiam. Thus, default will not commence because of the factual defects of the demand letter having sent to the wrong address.
A perusal of the demand letter[27] shows that that it was addressed to 221 General Segundo Streeet, instead of 22-I General Segundo Street, as reflected in the Lease Contract. It was also received by a certain Frank Santiago. Due to this incongruence, it is therefore unclear whether or not the demand letter indeed reached the hands of the appellant.
Article 1169 of the Civil Code provides that those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. The demand may be judicial, as when a complaint for specific performance is filed; or extrajudicial, without court proceedings.[28] Thus, the filing of this case can then be properly considered as the time of demand for payment.
Appellee entitled to legal interest.
In the landmark case of Eastern Shipping Lines, Inc. vs. Court of Appeals[29], the Court laid down the guidelines regarding the manner of computing legal interest, the pertinent portion of the ruling reads:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated 16 May 2013, approved the amendment of Section 2 of Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799, Series of 2013, effective July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1.The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum — as reflected in the case of Eastern Shipping Lines but will now be six percent (6%) per annum effective July 1, 2013.[30]
Applying the foregoing to the present case, the amount due shall earn the legal interest of six percent (6%) per annum from the time of filing of the judicial demand, which is the time of filing of this case.
Attorney’s fees and litigation expenses can be awarded by the court when the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.[31] Here, since appellant’s act compelled appellee to institute this case, attorney’s fees of P20,000.00 is proper. The award of P29,403.00 as litigation expenses is also proper since this amount is duly supported by official receipts.[32]
WHEREFORE, the appeal is DENIED. The Decision of the trial court in Civil Case No. 8155 is AFFIRMED. Appellant Francis Juan is hereby ordered to pay appellee Andree Abriam, the following amounts:
| 1.) | P1,352,409.93 as total variable rent due for the years 2002 to 2006, plus six percent (6%) interest from the date of filing of the complaint; | |
| 2.) | P29,403.00 as litigation expenses; | |
| 3.) | P20,000.00 as attorney’s fees, plus costs of the suit. |
SO ORDERED.
Delos Santos, E.L., Chairperson., and Lagura-Yap, M.B., JJ., concur.
[1] Rollo, pp.39-52
[2] Records, pp.160-164
[3] Records, p.165
[4] Records, pp. 160-164.
[5] Records, p.126s
[6] supra
[7] Records, p.163
[8] Records, p.164
[9] Records, p.162
[10] Rollo, p.126
[11] Recreation and Amusement Association of the Philippines vs. The City of Manila, et. al., G.R. No. L-7922, February 22, 1957, citing Fay vs. Noble, 7 Cushing (Mass.) 188.
[12] SEC Opinion dated 3 December 1998, cited in Aquino, Philippine Corporate Law Compendium, 2011, 128).
[13] Aquino, Philippine Corporate Law Compendium, 2011, 128.
[14] “Section 3.02 – The Leased Premises shall be allowed to be subleased to any company, individual, provided that the LESSOR is notified in writing in advance and consents thereto, which consent shall not be unreasonably withheld.”
[15] Article 1159, New Civil Code.
[16] Paras, Paras, Civil Code of the Philippines Volume IV, 17th Edition, 87.
[17] Article 1315, New Civil Code.
[18] Decision, Rollo, p.50.
[19] TSN, 4 February 2010, p.5
[20] ibid
[21] Salas v. Sta. Mesa Market Corporation, G.R. No. 157766, July 12, 2007.
[22] TSN, August 10, 2009, pp. 7-10
[23] Sec.23, Rule 132, Rules of Court.
[24] Id.
[25] Go v. Court of Appeals, G.R. No. 112550, February 5, 2001; Encinas vs. National Bookstore Inc., G.R. No. 162704, November 19, 2004.
[26] supra
[27] Records, p.165
[28] Paras, Civil Code of the Philippines Volume IV, 17th Edition, 123.
[29] G.R. No. 97412, July 12, 1994.
[30] Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013
[31] Article 2208, Civil Code of the Philippines.
[32] Records, p.167