G.Q. GARMENTS, INC., PETITIONER, VS. ANGEL MIRANDA, FLORENDA MIRANDA AND EXECUTIVE MACHINERIES AND EQUIPMENT CORPORATION, RESPONDENTS.

G.Q. Garments versus Miranda

The Case

This is a petition for review on certiorari brought by G.Q. Garments, Incorporated against Angel Miranda, Florenda Miranda, and Executive Machineries and Equipment Corporation. G.Q. Garments leased a parcel of land in Bacoor, Cavite from Angel Miranda under a fifteen-year contract, only to be forcibly evicted from the premises by Florenda Miranda and armed men barely a month before the lease was to commence. The corporation sued for damages and recovery of possession. The case matters because it draws the line between two kinds of disturbance that a lessee may suffer, and it tells us when a lessor answers for the acts of a trespasser and when he does not. It is a staple for questions on the lessor's warranty of peaceful enjoyment under the Civil Code, and on the strict proof required for an award of actual damages.

Procedural History

G.Q. Garments filed a complaint for damages and recovery of possession before the Regional Trial Court of Cavite City, Branch 17, impleading Angel Miranda, Florenda Miranda, and the corporation as alternative defendants. The trial court dismissed the complaint against all the alternative defendants without prejudice, although it declared that the plaintiff was entitled to damages, because it found that other cases were pending. G.Q. Garments moved for reconsideration, and when the trial court denied the motion, it appealed to the Court of Appeals. Angel Miranda also appealed. The Court of Appeals reversed the trial court. It dismissed the complaint with prejudice as against Angel Miranda, and ordered Florenda Miranda to pay G.Q. Garments nominal damages of 300,000 pesos, attorney's fees of 200,000 pesos, and the costs of suit. G.Q. Garments moved for reconsideration, and the Court of Appeals denied the motion. G.Q. Garments then elevated the matter to the Supreme Court by petition for review on certiorari.

Facts

Angel Miranda owned a parcel of land in Niog, Bacoor, Cavite, covered by a transfer certificate of title in his name. In 1984, his son Angelito established Executive Machineries and Equipment Corporation, which built a factory on the property under a verbal month-to-month lease with Angel at 8,000 pesos a month. After Angelito died in June 1988, the corporation stopped paying rent but continued to occupy the premises. Its factory was totally destroyed by fire in November 1989. Angel then demanded the accrued rentals, amounting to 280,000 pesos as of May 1991, and terminated the oral lease effective June 1991. The corporation eventually vacated the premises, but the unpaid rentals remained.

In November 1991, Florenda Miranda offered to sublease the property to G.Q. Garments, showing a purported lease contract allegedly signed by Angel in favor of the corporation. The officer in charge of G.Q. Garments declined, because Florenda could not present Angel to sign the contract in his presence. He later located Angel himself, and on December 23, 1991, Angel and G.Q. Garments executed a contract of lease for fifteen years, from February 1, 1992 to January 31, 2007, at 30,000 pesos a month. G.Q. Garments paid 90,000 pesos as deposit and advance rental, secured its permits, moved in its equipment and materials, and began constructing a building and factory.

On January 27, 1992, Florenda, accompanied by armed men who identified themselves as policemen, forcibly evicted G.Q. Garments from the premises, claiming she was the owner and that the place was covered by another lease. Her group took equipment, machinery, and other property of the corporation. Angel later obtained a copy of the purported lease in favor of the corporation, and in March 1992 sued to have it declared null and void on the ground that his signature was forged. G.Q. Garments sought police assistance and briefly regained possession, but Florenda's group returned, ousted its personnel, and again removed its equipment and ransacked its materials. In April 1992, G.Q. Garments instituted the action for damages and recovery of possession.

Issues

• Whether or not the Court of Appeals erred in awarding G.Q. Garments damages far below the amount it prayed for, by finding that its claim for actual damages was not sufficiently proven.
• Whether or not Angel Miranda, as lessor, should likewise be held liable for damages to G.Q. Garments, and be ordered to reimburse the 360,000 pesos it paid him as rentals and deposits.

Applicable Provisions

Article 1654 of the New Civil Code provides:

The lessor is obliged: (1) To deliver the thing which is the object of the contract in such a condition as to render it fit for the use intended; (2) To make on the same during the lease all the necessary repairs in order to keep it suitable for the use to which it has been devoted, unless there is a stipulation to the contrary; (3) To maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract.

This is the warranty invoked by G.Q. Garments against Angel, and the Court must decide whether Florenda's acts breached it.

Article 1664 of the New Civil Code provides:

The lessor is not obliged to answer for a mere act of trespass which a third person may cause on the use of the thing leased; but the lessee shall have a direct action against the intruder.

This is the provision on which the Court of Appeals absolved Angel, treating Florenda as a third person or intruder.

Article 2199 of the New Civil Code provides:

Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

This governs the proof required for the actual damages claimed by G.Q. Garments.

Ruling

On the first issue, the Court held that the claim for actual damages was not properly substantiated. The Court affirmed the finding of the Court of Appeals that the alleged loss of articles, machinery, and equipment in the total sum of 9,960,000 pesos was not proven by clear and convincing evidence. Apart from the bare testimony of the witness and the witnesses he presented, there was no proof of the existence of these items before Florenda took over the property. The listing of lost items was self-serving, since no inventory was made before delivery to the premises and no receipts or proof of acquisition were presented. The Court stressed that actual damages are not presumed. The claimant must prove the actual amount of loss with a reasonable degree of certainty, premised upon competent proof and on the best evidence obtainable, and the award cannot rest on surmises, speculations, or conjectures. The Court did acknowledge that the existence of a loss was established, since the equipment and machinery were taken and the building destroyed, and that absolute certainty as to the amount is not required. But the evidence fell short, and so the claim failed.

On the second issue, the Court agreed with the Court of Appeals that Angel was not liable. The unlawful acts were caused by Florenda, a third person or intruder, and there was no evidence that Angel participated, directly or indirectly, in the forcible ejectment or the taking of the corporation's property. The Court held that the lessor's obligation under Article 1654 to maintain the lessee in peaceful and adequate enjoyment is a warranty that the lessee shall not be disturbed in his legal, not physical, possession. Florenda disturbed only the physical possession of the leased premises, not the legal possession of G.Q. Garments. Hence, under Article 1664, Angel was not obliged to answer for a mere act of trespass, and the lessee's remedy was a direct action against the intruder. The Court likewise did not grant the reimbursement of the 360,000 pesos paid as rentals and deposits.

Doctrine

The lessor's warranty under Article 1654 of the New Civil Code to maintain the lessee in peaceful and adequate enjoyment of the lease is a warranty against disturbance in law, not in fact. It guarantees that the lessee shall not be disturbed in his legal possession, not his physical possession. Where a third person or intruder disturbs only the lessee's physical possession, the lessor is not obliged to answer for that mere act of trespass under Article 1664, and the lessee's remedy is a direct action against the intruder. For actual damages under Article 2199, the claimant bears the burden of proving the precise amount of the loss with a reasonable degree of certainty, upon competent proof and the best evidence obtainable. Actual damages are never presumed and cannot rest on surmises, speculations, or conjectures.

Disposition

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, which dismissed the complaint with prejudice as against Angel Miranda and ordered Florenda Miranda to pay G.Q. Garments nominal damages, attorney's fees, and the costs of suit.

Remember This

The single line to memorize is that the lessor's warranty of peaceful enjoyment covers disturbance in law, not disturbance in fact, so a mere trespass by a third person gives the lessee a direct action against the intruder, not against the lessor. Examiners use this case to test the Article 1654 and Article 1664 distinction, and to test the rule that actual damages must be proven with reasonable certainty and are never presumed.