BENITO LEGARDA Y TUASON, PLAINTIFF AND APPELLANT, VS. MARIANO B. ZAEATE, DEFENDANT AND APPELLANT.

This appeal by bill of exceptions was raised by counsel for the
plaintiff and counsel for the defendant, from the judgment of October
15, 1915, in which the court held that the defendant lessee, Mariano B.
Zarate, is liable only for the payment of the rents at the rate of 5
per cent per annum of the assessed valuation of the leased properties,
which is equivalent to P583.32 for the period from January, 1914, to
May, 1915, inclusive and sentenced the defendant to pay this sum to the
administrator of the estate of the plaintiff, Benito Legarda y Tuason,
deceased, without special finding as to costs.

On June 4, 1915, counsel for Benito Legarda y Tuason filed a written
complaint in the Court of First Instance of this city against Mariano
B. Zarate, alleging as a cause of action that on April 23, 1910, the
plaintiff’s attorney in fact leased to the women Kami Yunioka, Turu
Kaneko, and Lamasta Kima lots Nos. 9, 25, and 23, respectively
(ExhibitsA, B, and C attached to the complaint), of Parcel F of the
lands belonging to the plaintiff and which formed a part of the
Nagtajan Hacienda; that each of the said lots contained an area of 600
square meters; that the annual rental of the property that was the
subject matter of each contract, was 10 per cent of the assessed
valuation thereof; that subsequently, to wit, on September 5, 1910, the
said lessees, with the plaintiff’s consent and approval, conveyed to
the defendant Mariano B. Zarate their respective rights derived from
the said contracts of lease, and all their interests in the buildings
erected on the said lots; that since that date the defendant had been
paying the rents due, within the periods stipulated, always on the
basis of 10 per cent of the assessed valuation of the property, with
exception of the rents corresponding to the whole of the year 1914 and
to the months from January to May, 1915, which he had refused to pay.
Therefore the plaintiff’s counsel prayed the court to enter judgment by
sentencing the defendant to pay to the plaintiff the rents in arrears
amounting to P1,166.65, in addition to those that might be owing by him
subsequently and up to the time decision be rendered, on the basis of
10 per cent per annum of the present assessed valuation of the
property, and to pay the costs of the suit.

On June 29, 1915, counsel for the defendant filed hiswritten answer
to the above mentioned complaint; he denied the essential parts thereof
and added that on the date of the transfer of the said contracts of
lease to the defendant, on September 5, 1910, no building of any kind
stood on the land in question. In special defense he alleged that prior
to and at the time of the execution of the contracts Exhibits A, B, and
C, by and between the plaintiff and the original lessees, it had been
decided and stipulated that the 10 per cent of the assessed valuation
which these latter should pay as annual rental should be based on an
assessment not in excess of one peso per square meter; that at the time
the leases were transferred to the defendant the land was used solely
for raising rice-grass, and that it was agreed between the contracting
parties that the defendant should spend labor and money in the
improvement of the said land; that the defendant filled in this land
and erected buildings thereon, but that he did this only after it had
been clearly agreed between himself and the plaintiff that the rental
of the said properties should be based on their assessed valuation
which should not exceed one pesos per square meter, for, were it not
for this agreement, the defendant would not have accepted such a
contract; that in 1911, even after the opening of a street through the
lands in question, these properties were assessed only at one peso per
square meter, which valuation was raised to P2 in 1914, when the
plaintiff, without notifying the defendant, protested against the said
increased valuation and appealed before the board of tax revision,
which saw fit to fix the valuation of the said properties at P4 per
square meter, which facts became known to the defendant for the first
time when the plaintiff tried to collect from him the annual rental on
the basis of 10 per cent of P4 per square meter, which the defendant
refused to pay; that, by reason of the protest made by the lessees and
the owners of properties comprised within the said lands, the tax
valuation corresponding to the year 1915 was reduced to P3 per square
meter; that, notwithstanding the plaintiff’s claim that he was entitled
to collect from the defendant 10 per cent of the assessed valuation of
P4 per square meter, in 1913 and 1914 the plaintiff accepted rents for
similar lands leased by other persons, under contracts identical to
that made with the defendant, at the rate of 10 per cent of the
assessed valuation of P1 per square meter; and, finally, that the
defendant is willing at any time to pay to the plaintiff the rents for
the said lands at the rate of 10 per cent of the assessed valuation of
Pl per square meter, as was stipulated between the parties, but that
the plaintiff, notwithstanding the several tenders of payment made by
the defendant, had refused and still refused to accept the same.
Therefore said counsel prayed the court to absolve the defendant from
the complaint, with the costs against the plaintiff.

After the hearing of the case and the introduction of evidence by
both parties, the court rendered the decision aforementioned, to which
both the plaintiff and the defendant excepted and in writing moved for
a reopening of the proceedings and a new trial. These motions were
overruled, exception was taken by the appellants, and, upon
presentation of a single bill of exceptions, in accordance with a
stipulation made between both parties, the same was approved and
forwarded to the clerk of this court.

The point at issue in this suit is in regard to the amount of the
rents that the defendant, Mariano B. Zarate, should be obliged to pay
to the administrators of the estate that belonged to the owner of the
three parcels of land occupied by the defendant’s buildings on Plaza
Gardenia, of the district of Sampaloc, Manila.

For the proper determination of this suit, it is necessary to
declare what construction must be given to paragraph 3 of the contracts
of lease A, B, and C, of the date of April 23, 1910, all of the same
tenor, by virtue of which three Japanese women leased for a term of 25
years, extendible for an equal length of time at the will of the
parties, the lots of land described in the complaint. This paragraph 3
of the contract reads as follows:

“The price of the lease shall be ten per cent (10%) per annum, net,
of the assessed valuation of the property specified in this contract.
These rentals shall be payable monthly, in advance and within the first
ten (10) days of each month, at the domicile of the lessor or in any
other place he may designate, and such payments shall be made in
Philippine currency.”

The contract was executed by Dr. Benito Valdez, who, on the said
date, was the attorney in fact and general administrator of the entire
estate of the deceased Benito Legarda y Tuason (Exhibit A), but the
person who negotiated directly with the prospective lessees of the
lands was a man named Ramon Gavito, a subagent or administrator of the
said lands. On the date of the contracts, the assessed valuation of the
leased lands was six centavos and a half per square meter (record, p.
54) and this valuation continued in force until 1911, when it was
raised to P1 per square meter (record, p. 55). A few months subsequent
to the execution of the said contracts, to wit, on September 5, 1910,
the original lessees, with the consent of the attorney in fact, Valdez,
ceded and transferred their interests in thesaid parcels of land to the
defendant Mariano B. Zarate, who constructed houses thereon, and, by
reason thereof and because of the opening of streets in that locality,
the assessed valuation of the Legarda lots was increased from year to
year until in 1914 it was P4 per square meter (record, p. 58), and as
the rental price of the properties hadthus considerably increased, the
defendant refused to pay the rents on the basis of the new assessment
rate.

In effect, the defendant lessee refused to pay the
rentscorresponding to the year 1914 and the following years, if the
rate on which they were to be computed should be greater than P1 for
each square meter. The defendant alleged that at the time he accepted
the transfer of the contracts by the Japanese women, the administrator
of the hacienda, Ramon Gavito, and Tomas Arguelles, who took part in
the transaction, assured him that the amount of 10 per cent of the
“assessed valuation” of the said properties, which he was to pay as
rent, would be computed on a valuation not in excess of P1 for each
square meter.

However, the plaintiff contends that paragraph 3 of the contracts
under discussion clearly enough signifies the intention of the parties
that the lessee should pay as an annual rent 10 per cent of the
valuation for which the said properties be assessed, whether such
valuation be increased or decreased, and that no limitations whatever
were set on the valuation and the amount that should be paid as rental.

Such was the testimony of Dr. Benito Valdez, who executed the said
contracts. This witness stated that “the expression 10 per cent
referred to the assessed valuation of the land in any period of time;”
that he was the generaladministrator of the estate of the deceased
Legarda and was vested with the exclusive right to make contracts in
regard to that estate, wherefore Ramon Gavito was not authorized to
enter into any contract with regard thereto, as he was a mere agent of
the witness and only executed the orders the latter gave him. Valdez
further testified that the construction of the defendant’s houses on
the Nagtajan Hacienda was detrimental to the interests of the Legarda
estate in that locality, inasmuch as, by reason of the few improvements
on a small part of the hacienda, the whole of the latter was obliged to
bear an increase in tax, which would not have been the case had it not
been for the houses that stood there; and that the said hacienda was
then assessed at more than P300,000 (record, pp. 56-57) and produced in
rentals no more than about P12,000 per annum.

Laureano Benavides, a clerk in the service of the administrator of
the Legarda estate, testified that the defendant Zarate paid the rents
pertaining to the months from Aprilto December, 1910, on the basis of 6
1/2 centavos per square meter; that he paid those pertaining to the
years 1911, 1912, and 1913 on the basis of P1 per square meter, for
this was the assessed valuation of the property at that time; and that
when, in 1914 and 1915, the assessment rate was raised to P4 and P3,
respectively, per square meter, the defendant failed to pay the said
rents.

Tomas Arguelles, who, in representation of the member of the
municipal board, McDonald, had taken a hand in the laying out of the
new barrio of Gardenia and in the transfers of the contracts of lease
from the Japanese women to the defendant, testified that the meaning of
the said paragraph 3 in the contracts aforementioned did not seem clear
to him, for if the 10 per cent mentioned in this paragraph referred to
the assessed valuation of the land at any period, the amount required
as rent was excessive; that, consequently, he consulted Ramon Gavito,
who stated to him that the land “is assessed at one peso per square
meter,” and hence that the rent to be paid would be only P6 or P7 per
annum—a price which appeared reasonable to witness—but the latter did
not understand that the rate of the lease price was to be modified in
accordance with the increase or decrease in the assessed valuation of
the land, and added that when it was raised to P2 per square meter, in
1914, Gavito filed a protest with the board of tax revision, requesting
a reduction, and that this board, by resolution of March 17th of the
same year, 1914, deciding the protest, raised the valuation of said
lands to ?4 per square meter, and that the defendant was not informed
of these steps nor of the increase until the board had unfavorably
decided the protest, about the month of March, 1914.

The defendant testified that he had availed himself of the services
of Arguelles in the transactions carried on with the administrator of
the estate, for the transfer of the contracts held by the Japanese
women and that he had gleaned therefrom that the defendant would be
obliged to pay a rent of only 10 centavos for each square meter of land
occupied by him (record, p. 70), although the assessed valuation should
be greater than Pi per square meter (record, pp. 72-73). The defendant
added that he wasever willing to pay to the plaintiff the amount of the
rentals in arrears, provided that the rate of payment did not exceed 10
centavos for each square meter of land occupied by him.

S. C. Choy, a Chinaman, another owner of houses in the same district
where those that belong to defendant are situated, and who also had
obtained by transfer the lease rightsof a Japanese woman in a certain
lot of land pertaining to the Nagtajan Hacienda, testified at the trial
that he had dealt exclusively with Ramon Gavito, who was in charge of
the said hacienda, and that from the conversations he had
with the said Gavito before accepting the transfer he, the witness, was
convinced that he would have to pay rent only at the rate of 10 per
cent on an assessed valuation of Pl and that if the cost of the lease
had exceeded this
amount, he would not have accepted the transfer of the contract.

In rebuttal Mauro Prieto, another of the administrators of the
estate of the deceased Benito Legarda, testifiying with respect to the
allegation made in the defendant’sanswer, in regard to the payment of
the rent on the 10 per cent basis, stated that it was true, as
aforesaid, that the administration of the estate had received from the
lessees S. C. Choy and Go Chioco payments of rentals pertaining to the
year 1914, at the rate of 10 per cent on an assessed valuation of one
peso, but that this was done through an oversight, and that afterwards
a claim was made on these lessees for payment of the difference
(record, p. 81).

The record also discloses that on December 28, 1905, Ramon S. Gavito
was appointed administrator of the Nagtajan Hacienda, by the late
Benito Legarda, according to the notarial instrument Exhibit 8 (record,
p. 87), with right to lease parcels of land pertaining to that hacienda,
for such rentals, and on such terms and conditions as he might deem
proper, but with a proviso that all the contracts of lease executed by
him should produce no effect whatever until they had been approved by
the signature of the lessor Legarda. That the said Gavito continued to
act in such capacity and with that power appears to be proven by the
fact that the receipts for rentals paid for the lands pertaining to the
Nagtajan Hacienda were signed by Ramon Gavito, as may be seen by the
receipts 1, 2, 3, 5, 6,
and 7 (record, pp. 23-32) in which Gavito styles himself
“administrator,” and the most recent of them bears the date of May 7,
1914, as corroborated by Valdez (record, p. 53). However this power and
authority granted to Gavito in the document of December 28, 1905,
should be deemed to be revoked by reason of the full and unlimited
power conferred by the said Benito Legarda upon his son Benito Legarda
y de la Paz and his sons-in-law Mauro Prieto y Gorricho and Benito
Valdez, by means of the notarial document of December 20, 1907, which
was amplified by another such instrument of November 12, 1909 (record,
pp. 99-107).

Similar contracts, copied into the bill of exceptions as Exhibits.
A, B, and C (as assigned and transferred, without any modification, by
the lessees, the Japanese women Kami Yunioka, Turu Kaneko, and Lamasta
Kima, to Mariano B. Zarate, who substituted these lessees, with the
knowledge and consent of Dr. Benito Valdez in his capacity of
attorneyin fact for Benito Legarda y Tuason) were not challenged by the
defendant, and remain in full force and effect; consequently paragraph
3 of the said contracts, which specifies the rental for each of the
three lots 9, 23, and 25 of parcel F of the Nagtajan Hacienda, which
are now occupied by the substituted lessee Mariano B. Zarate, produces
its due effects and natural consequences originating from the
stipulated agreements; and as the words and terms employed in the said
paragraph 3 of the said contracts of lease, are clear and positive,
their phraseology cannot be charged with being unintelligible,
ambiguous or doubtful, nor as precluding a true and right understanding
of the true meaning intended to be conveyed by the said paragraph 3.

It was understood by both contracting parties, as recognized by the
trial court in the judgment appealed from, that the rents of the lands
occupied by the lessee would assessed valuation of the property on the
date of the contract, but on the basis of such valuation as might be
fixed by the Government in accordance with appraisements made from time
to time during the course of the 25 years stipulated as the term of the
lease. This fact is corroborated by the further fact that on the date
of the contract the property was appraised at 6£ centavos per square
meter, and when this valuation was raised to P1 per square meter the
defendant Zarate, notwithstanding that no stipulation was made in
regard to the said basis of 10 per cent of P1, did not protest against
the payment of the taxes pertaining to the years 1911, 1912 and 1913,
on the basis of 10 per cent on a valuation of P1 per square meter. This
acquiescence on the defendant’s part shows that he
was informed and knew that the rental of the land occupied by him was
10 per cent of the assessed valuation of the property as fixed by the
Government for the payment of the land tax.

The defendant lessee was not ignorant of the fact that the
assessment rate was raised proportionally as the property acquired
greater value, and he must have taken thesecircumstances into
consideration when he substituted himself for the three Japanese
lessees in the contracts of lease of the three lots now occupied by
him, for, as it appears to have been stipulated in paragraph 3 of the
three said contracts of lease, the rental was to be 10 per cent,
payable annually, of the assessed valuation of the property,that is, of
the valuation which each year might be given to the leased property on
its appraisement for the purpose of taxation, and it can not be
understood that the 10 per cent of the assessed valuation of the land
on the date of the contract, April 23, 1910, was fixed as the rate of
the lease price, inasmuch as this was not so stipulated by and between
the contracting parties.

The words used in the said paragraph 3 demonstrate that the
intention of the parties was that the rental of the leased lands should
be 10 per cent per annum of the assessed valuation of the property, and
as this valuation might be increased or decreased during the 25 years
of the life of the contract, it is evident that the stipulation made
was that the rental should be 10 per cent of such valuation as on
assessment might be given to the leased property. Furthermore, it does
not appear to have been stipulated that this 10 per cent per annum was
to be a fixed amount in the contract, nor that the rental was not to be
affected by the natural fluctuations in the appraisement of the
property, according to the rate of assessment. Therefore, it is
undeniable that the defendant, in accepting the contracts executed by
and between the plaintiff and the said three Japanese women, and in
assuming the liabilities contracted therein by these latter, bound
himself to pay 10 per cent per annum of the assessed valuation of the
leased lands in accordance with the assessment rate in force each year.

Article 1281 of the Civil Code prescribes that, “If the terms of a
contract are clear and leave no doubt as to the intentions of the
contracting parties, the literal sense of its stipulations shall be
observed.”

The phraseology employed in paragraph 3 of the saidcontracts is
explicit and positive; it reveals precisely and clearly the respective,
and, at the same time, unanimous intention of the contracting parties
to the effect that the rental of each one of the leased portions of
land should be 10 per cent of the assessed valuation of the property,
and that if during the course of the stipulated twenty-five years the
valuation of the land should be raised the said 10 per cent should be
computed on the basis of the valuation fixed on assessment. No other
construction outside of the proper and genuine meaning of the words
used in the said paragraph 3 of the three contracts aforementioned may
be understood.

Besides, it can not be deduced from the said paragraph 3 that the
words therein employed do not convey the intention of the contracting
parties, inasmuch as it does not appear in this paragraph, or in the
others contained in the said contracts, that any agreement whatever was
made that the 10 per cent per annum was to be calculated on any fixed
amount other than the fixed assessed valuation of the property ; if its
valuation, as determined by its assessment, had decreased, the price of
the lease would also have decreased, and the defendant has acquired no
right to refuse to pay the rent which the plaintiff is entitled to
collect from him pursuant to the terms of the contract, simply because
the assessed valuation of the leased property was increased.

Article 1278 of the Civil Code says: “Contracts shall be binding,
whatever may be the form in which they may have been entered into,
provided that the essential conditions required for their validity
exist.”

The three contracts aforementioned contain the threerequisites
prescribed by article 1261 of the Civil Code, and if the defendant
lessee bound himself to pay 10 per cent per annum of the assessed
valuation of the lands occupied by him, and if this valuation has been
increased, he can find no valid reason in support of his contention
that he should pay only 10 per cent per annum on an assessed valuation
of P1 per square meter, which was not the assessed valuation per square
meter of the leased property in 1914 and 1915. The defendant lessee is
obliged, pursuant to the contract, to pay 10 per cent per annum of the
assessed valuation of the properties according to the respective
appraisements made by the Government in each of those two years, or
according to such appraisement as may be made in the future, during the
course of the stipulated contract.

“The validity and fulfillment of contracts can not be left to the
will of one of the contracting parties.” (Art. 1256, Civ. Code.)

Section 285 of the Code of Civil Procedure prescribes, “When the
terms of an agreement have been reduced to writing by the parties, it
is to be considered as containing all those terms, and therefore there
can be, between the parties and their representatives or successors in
interest, no evidence of the terms of agreement other than the contents
of the writing, except in the following cases.”

None of the cases mentioned in the section just cited are applicable
to the contracts, which have not been assailed as false, either
criminally or civilly.

For the foregoing reasons the judgment appealed fromshould be
reversed and the defendant, Mariano B. Zarate, should be, as he is
hereby, sentenced to pay to the plaintiff the sum of P1,166.65, as
rentals owing, and to pay those he may owe in the future on the basis
of 10 per cent per annum of the assessed valuation of the land occupied
by him. No special finding is made in respect to the costs of both
instances. So ordered.

Carson, Moreland, Trent, and Araullo, JJ., concur.