JAI-ALAI CORPORATION OF THE PHILIPPINES, PLAINTIFF AND APPELLANT, VS. LUIS CHING KIAT BIEK, ET AL., DEFENDANTS AND APPELLEES.

On March 30, 1949, plaintiff Jai-Alai Corporation filed in the Court
of First Instance of Manila the present action against the defendants
Luis Ching Kiat Biek, Ricardo Chung and “Ricardo Chung, Ching Kiat Biek
& Co., Ltd.”, a limited partnership known under the business name
and style of “Casino Royale & Co., Ltd.”, for the recovery of
damages in the total amount of P390,000.00. The complaint alleged,
among other things, that in the latter part of 1947, preparatory to the
reopening of its stadium at Taft Avenue, Manila, for the exhibition of
jai-alai games, plaintiff invited proposals for the lease of three of
its four bars and restaurants therein, known as the Keg Room, Bamboo
Bar and Popular Bar located, respectively, on the ground, second and
third floor; that on January 6, 1948, defendants submitted a bid for
the lease not only of the bars and restaurant mentioned, but also of
the Sky Room, a night club, restaurant and bar on the fourth floor;
that plaintiff started negotiations with them and later defendants
agreed, among other things, to operate as concessionaires the bars,
restaurants and night club covered by their bid for a period of 5
years, in consideration of rentals equivalent to 10% of the gross daily
sales with a guaranteed minimum annual rental of P78,000.00, and 20% of
the gross sales in the Sky Room from 6 p.m. until closing time; that
defendants likewise agreed “to invest in the finishing of the interior
of the said bars, restaurants and night club, as per the plans, and
specifications, of plaintiff’s architect, a minimum of P130,000.00, and
to equip the same with full equipment, furniture and fixtures at a
minimum investment of P115,000.00 all of which were to become the
property of plaintiff at the expiration of the five year term of the
contract”; that defendants, after commencing operation of the bars,
restaurants and night club complained that they were incurring losses
and that the cost of finishing the interior of the bars and restaurants
would exceed considerably the minimum amount they agreed to invest, and
therefore requested plaintiff to assume the cost in excess thereof;
that the plaintiff, heeding the request, agreed to assume payment of
the additional cost but only in the amount of P130,000.00 to be raised
by defendants by means of a loan the payment of which would be
amortized with the rentals due to plaintiff from defendants; that
defendants on subsequent dates requested further modifications, of the
contract, principally the reduction of the yearly rental from
P78,000.00 to P60,000.00, threatening that, otherwise, they would not
abide by the contract and would instead return the leased premises;
that on January 15, 1949, defendants closed the Sky Room nightclub
despite plaintiff’s admonitions that such act would constitute a
violation of the contract; that plaintiff, to minimize damages, took
back the concessions; and that as a consequence of the unjustified
breach and abandonment of the contract plaintiff suffered damages in
the amount of P390,000.00, representing the minimum total of the
stipulated 5 years rental at the rate of P78,000.00 per annum.

In their answer filed April 26, 1949, defendants denied most of the
allegations of plaintiff’s complaint. By way of special defenses, it is
alleged that the bid submitted by defendants was accepted by plaintiff
and constituted the contract between them; that pursuant to said
contract, defendants with plaintiff’s knowledge and consent took
possession of the premises, reconstructed and equipped the same as per
plans submitted by plaintiff, spending therefor the approximate sum of
P456,547.90 upon plaintiff’s assurance that it would assume payment of
the excess over the amount of P250,000.00, which they agreed to invest;
that from the beginning, with threats of cancelling the contract,
plaintiff interfered with the management and operation of the
concessions by defendants; that plaintiff failed to furnish elevator
services, or to install airconditioning units in the concessions, or to
provide a check room in the Sky Room premises as agreed upon; that on
or about January 16, 1940, because of the threat of plaintiff’s
employees to go on strike and of plaintiff’s continued violation of the
contract, which made it difficult and impossible to continue operating
the concessions, defendants suspended operations in the Sky Room that
on or about January 24, 1949, much to defendants’ surprise plaintiff
took over the entire concessions; that plaintiff thereafter operated or
relet the concessions for its own account to a third party for valuable
consideration, in spite of defendants’ protest; and that the
aforementioned, acts of plaintiff constituted a wanton violation of the
contract which completely relieved defendants of liability especially
as to future rents. By way of counterclaim, defendants, demanded
payment of P415,804.85 representing the total amount invested by them
in the rehabilitation of the concessions in question, less the rentals
in arrears due the plaintiff; P6,666.66 per month as the reasonable
rental value of the improvements; equipments and other properties in
the concessions; P130,000.00 as damages for the losses incurred due to
plaintiff’s interference and failure to provide the necessary
facilities; and P570,000 for unrealized profits from January 24, 1949
until ten years thereafter.

On May 6, 1949, plaintiff filed an answer to defendants’
counterclaim, denying liability and reiterating the allegations in its
complaint. This was later amended by plaintiff by inserting therein a
counterclaim of its own, alleging that under the contract between the
parties, all equipment, furniture and fixtures, etc., installed by
defendants for the rehabilitation of the concessions shall become its
property upon the expiration of the contract; and that in breaching the
contract, defendants caused plaintiff to suffer damages in the sum of
P350,000 representing the value of the improvements and equipments.
Answering the counterclaim, defendants denied the allegations therein
and reproduced the special defenses in their answer.

After trial, which took more than 4 years, the lower court on
December 22, 1953 found for the defendants and sentenced plaintiff
corporation to pay to defendants Luis Ching Kiat Biek and Ricardo Chung
or to defendant co-partnership the sum of P338,704, plus legal interest
thereon from January 24, 1949, until the said sum is fully paid; to pay
fully the account of defendants with Gonzalo Puyat & Sons in the
sum of P53,048.50; and to pay the costs. Prom that judgment, plaintiff
has appealed directly to this Court.

The evidence adduced at the trial, as found by the trial court,
clearly established that plaintiff corporation through its general
manager, Luis de Leon, accepted defendants’ bid for the lease of the
bars and restaurants in its stadium. Soon thereafter, with plaintiff’s
knowledge and consent, defendants started the repair and rehabilitation
of the bars and restaurants covered by their bid and purchased the
necessary furniture, equipment and utensils. In the course of the
reconstruction and rehabilitation, they discovered that to follow the
plans and specifications proposed by plaintiff’s architect, they had to
spend a total of P461,566.22, and inasmuch as they agreed to invest
only the maximum amount of P245,000.00, exclusive of P5,000.00 for the
uniforms of personnel, they suggested, as a matter of equity, that
plaintiff assume the cost in excess of the said maximum amount.
Plaintiff’s executive committee agreed under certain conditions, among
them, that defendants shall raise the extra amount needed by
negotiating a loan therefor, the payment of which shall be guaranteed
by the corporation; that defendants shall pay the interest on the said
loan: and that the loan shall be paid with amounts due the corporation
from defendants as rentals. Accepting the conditions defendants
borrowed from Mrs. Teresa de Leon, wife of Manager Luis de Leon of the
corporation, through their parents, who signed the corresponding
promissory note of accommodation, as insisted by the lender. Defendants
also had to obtain credit from Mañalas and Da. Silva and Gonzalo Puyat
& Sons.

Not long after the acceptance of defendants’ bid plaintiff proposed
a modification of its terms regarding the Sky Room, so that instead of
10% provided for in the bid, it would be entitled to 20 % of the gross
sales therein. The modification proposed by plaintiff was accepted by
defendants on the condition that the 20% rate will be applicable only
to sales after 6 p.m. and the said rate may be decreased as business
conditions demand.

The lower court further found that during defendants’ operation of
the bars and restaurants they were constantly handicapped and
embarrassed by undue acts of interference in the management and
operation of the concessions by the officers of plaintiff. Plaintiff’s
officials, notwithstanding the protests and pleadings by defendants,
refused to desist from such interference which proved prejudicial to
the latter; and instead, on January 24, 1949, plaintiff took over the
concessions, operated the Sky Room, and leased for P3,000.00 monthly
the other rooms and bars for its own account to a third party.
Thereafter, plaintiff started negotiations with defendants for the
refund of their investment but while the negotiations for amicable
settlement or compromise were taking place, plaintiff filed the present
action.

From the foregoing facts, the trial court in the decision complained
of ruled that it was the bid, exh. J, which was accepted by plaintiff
and modified only by two subsequent amendments mutually agreed upon by
the parties, and not the document exh. K, which constituted the
agreement between the parties. It also found that plaintiff terminated
said contract by taking over the management and operation of the
concessions pursuant to1 the right it reserved for itself under the
“Terms for Bids” to cancel the concession at any time, for or without
cause upon the reimbursement to the bidder of the inventoried cost less
depreciation computed at 20% per annum.

After going over the record, we find no reason for rejecting the
findings of the court below. The questions raised hinge on credibility,
and it is well-settled that in the absence of compelling reasons, its
determination is best left to the trial judge who had the advantage of
hearing the parties testify and of observing their demeanor on the
witness stand.

Plaintiff, in contending that it is exh. K which embodies the
agreement between the parties, insists that Mrs. Gertrudes C. Chung alias
Mrs. Ricardo Chung was the general manager of the defendant partnership
authorized to negotiate with plaintiff, and that defendants are now
estopped from denying her authority in signing the contract exh. K. But
as observed by the trial court, exh. K appears to be only a draft of
the alleged contract with numerous alterations, in different hands and
inks or pencils. It does not bear the signature of any of the parties
including plaintiff itself or its representative. The signature
“Ricardo C. Chung” under the typewritten words, “Mrs. Ricardo Chung”
was not proved to be that of one duly authorized to sign in behalf of
any of defendants. Moreover, Mrs. Gertrudes C. Chung and Mrs. Ricardo
Chung are two different persons, the former being the Filipina wife of
defendant Ricardo Chung’s father and office manager in charge of
personnel of Casino Royale, Inc., Ltd., while Mrs. Ricardo Chung, the
checker, is the Chinese wife of the defendant Ricardo Chung. Neither of
them was mentioned as party to the alleged contract, nor had either of
them been shown to have been authorized to sign it.

In any event, whether the contract between the parties be the bid,
exh. J, or the draft, exh. K, the fact remains that the concession was
cancelled by plaintiff, and in such as eventuality it is stipulated
under both documents that plaintiff shall refund to defendants the
inventoried cost of equipment and improvements less depreciation at 20%
per annum.

That defendants never abandoned the concessions cannot be doubted.
The parties were trying to come to terms on some disputes and
defendants were operating the concessions when plaintiff took over and
terminated the lease, contract. The Sky Room was closed, it is true,
but only temporarily and because of the strike of the employees. It
would be strange, indeed, for defendants to invest hundreds of
thousands of pesos in the concessions only to abandon them after
operating for only about 6 months and consequently lose or forfeit all
they had spent for the equipments and improvements. Defendants could
not prevent the taking over by plaintiff because in their bid, as
already stated, they agreed to the reservation by plaintiff of the
privilege to cancel the contract at any time, for or without cause upon
reimbursement of the inventoried cost less depreciation at 20% per
annum.

Plaintiff’s counsel also claims that the trial court erred in not
permitting him to cross-examine defendants or to examine his witnesses
in rebuttal. It is argued that the true defendants and concessionaries
with whom plaintiff dealt were defendants’ fathers, Chung Kiat Kang and
Ching Leng and that plaintiff’s counsel was misled by defendants’
counsel during the hearing of the motions for postponement. The motions
for postponement, however, were heard long after the action had been
filed, and naturally plaintiff’s counsel had had full opportunity to
examine the evidence. The bid submitted by defendants as early as
January 6, 1948 was signed by them in their own names. It is
established that plaintiff contracted with said defendants and awarded
the concessions to them. Plaintiff knew that as early as April, 1948,
defendants organized a partnership duly registered with the Securities
Exchange Commission with themselves as the only general partners.
Plaintiff also knew of the respective fathers of herein defendants, as
shown by its guaranty dated December 28, 1948 (about a year after the
submission of the bid) to the payment of the promissory note obtained
by defendants through their fathers from Mrs. Teresa de Leon. In that
document, which was prepared by plaintiff alone, the fathers of
defendants, Chung Kiat Kang and Ching Leng, are referred to as the
concessionaires, but this is explained by the fact that, as already
stated, they, signed the promissory note for the accommodation of
defendants as required by Mrs. de Leon. The alleged confusion,
therefore, was nonexistent, so that there was no need for the
presentation of rebuttal evidence to clarify the matter. It should here
be stated that the trial court; nevertheless, allowed plaintiff’s
counsel to present rebuttal witnesses, who had previously testified,
only it did not allow him to examine them on matters which did not
constitute proper rebuttal evidence.

As to, plaintiff’s claim that the lower court erred in denying its
motion for continuance as well as that to amend pleadings to bring in
indispensable and necessary parties, suffice it to say that the motion
for continuance was merely to bring another rebuttal witness. Its
denial, therefore, was proper. It is significant to note that then
General Manager Luis de Leon, with whom, according to defendants they
dealt and who informed them that their bid had been accepted, was never
presented as a witness. With respect to plaintiff’s other motion to
bring in new parties defendants (herein defendants’ fathers), we,
likewise, find that the trial court did not err in denying the same.
The motion was made 5 years after the filing of the complaint and when
the trial was already on rebuttal stage. It was also unnecessary since
the persons proposed to be brought in were not really indispensable
parties.

The record shows and it is not disputed that the defendants invested
the total of P461,566.22 of which P245,000 plus P5,000 for uniforms,
was exclusively for their account, while the overage of P211.566.22 was
assumed by the plaintiff corporation to be amortized with rentals due
from defendants. Plaintiff obligated itself to reimburse P245,000 plus
P5,000 spent for uniforms, minus depreciation at 20% per annum. Since
only almost 6 months of the term had elapsed the depreciation should be
only for 1/2 year or 10%, or P25,000. Consequently, defendants should
be refunded P225,000, which , added to P211,566.22, the overage which
should be fully refunded, and to P15,299.85, accounts payable to them
as per exh. 9-B, aggregate P451,866.07. Plaintiff should, however, be
given credit for the amounts mentioned in exhs. 9 and 9-A, “Statement
of Accounts”, after making the necessary adjustments as follows: (1)
P49,927.51 for percentages due plaintiff on the gross income of the
concessions from May to December, 1948 after deducting from the amount
of P55,475.01 claimed as percentages by plaintiff the overcharge of 10%
for the Service Bar in the sum of P5,547.50; (2) P3,500 for the cash
advance for the piano paid by plaintiff; (3) P6,685.47 for the
consumption of water, electric fluid and telephone fees, after
deducting P4,456.97 as overcharge of 40% of the total bill in the
amount of Pll,142.44, because plaintiff itself shared in the use of
said utilities; and (4) P53,048.60, the amount which is due from
defendants to Gonzalo Puyat & Sons, but payment of which was
assumed and started by plaintiff, according to the testimony of
plaintiff’s own accountant.

The total of said amounts for which plaintiff should be credited is
P113,161.48, and deducting said sum from the aggregate amount of
P451,866.07 due defendants, there is a balance of P338,704.59 which
plaintiff should have refunded to defendants when it took over the
concessions and terminated the lease contract on January 24, 1949.

Finding no error in the judgment appealed from, we hereby affirm it, with costs against plaintiff-appellant.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion and Reyes, J. B. L., JJ., concur.
Barrera, J., took no part.