AGUSTIN GA. GAVIERES, PLAINTIFF AND APPELLANT; VS. FLORA BROTO, VIUDA DE MAURIS, DEFENDANT AND APPELLEE.

Gavieres versus Broto

The Case

This is Gavieres versus Broto, a contract case decided by the Supreme Court in March 1909. Agustin Garcia Gavieres, a tenant, sued Flora Broto, the widow of Mauris and the owner of a building on the corner of Calles Real and Magallanes in Manila, for damages arising from an alleged breach of their lease contract. The tenant claimed that the landlord wrongfully cancelled the bar and restaurant licenses and failed to secure their renewal, forcing him to surrender the premises and lose his profits. The case matters because it teaches how a lease of a building with a going bar and restaurant is construed, how the duty to secure licenses is allocated, and how damages must be proved before they can be awarded.

Procedural History

The case began in the trial court, which held that under the contract no obligation rested on the landlord to obtain a license for the operation of the bar, because the only thing rented was the building together with the furniture and fittings. The trial court also held that the tenant, having voluntarily surrendered the premises, was estopped from claiming damages resulting from that surrender, even though the bar and restaurant had been closed by the authorities for lack of the necessary licenses. The case then reached the Supreme Court on appeal, and the Court reviewed the trial court's construction of the contract and its conclusion on the tenant's claim.

Facts

On January 8, 1903, Gavieres rented from Broto, for a period of six years, a building on the corner of Calles Real and Magallanes in Manila, together with the furniture and the bar and restaurant fittings then in the building. The contract fixed a monthly rental of seven hundred pesos, payable in advance within the first five days of each month. At the time the contract was made, Broto had already secured licenses to conduct a bar and restaurant in the building during the first half of the year 1903, and it was agreed that Gavieres would conduct the business under those licenses.

Gavieres paid the stipulated monthly rental down to and including the month of June. Sometime during that month, Broto applied for a renewal of her licenses from the first of July until the thirty-first of December. On the twenty-third of June, she demanded from Gavieres the sum of eight hundred sixty-four pesos in Mexican currency, the amount required by the municipal authorities for the renewal. Gavieres declined to advance the amount, claiming that under the contract it was the landlord's duty to secure the licenses and advance the cost, to be returned to her in six equal monthly installments during the license period.

On the same day, Broto formally petitioned the Collector of Internal Revenue to cancel her application for a renewal of the licenses for the latter half of the year 1903, and also to cancel the unexpired portion of the licenses then in force covering the period down to the end of June. Sometime thereafter, and before the first of July, the municipal authorities closed the bar on the ground that the licenses had been cancelled. On the fifteenth of July, Gavieres made formal delivery of possession of the property to Broto, protesting against her cancellation of the licenses for the first half of the year before they had expired and her failure to secure new licenses for the latter half. He then sued for forty thousand pesos in damages.

Issues

• Whether or not the contract imposed upon the landlord the duty of applying for and taking out the necessary licenses for the conduct of the bar and restaurant, the tenant's only obligation being to pay therefor.
• Whether or not the landlord's failure to secure the renewal of the license for the latter half of the year 1903 was due to the tenant's fault, barring his claim for damages on that ground.
• Whether or not the landlord was liable for having caused the cancellation of the unexpired portion of the license for the first half of the year 1903, which the tenant had already paid for.
• Whether or not the tenant established his damages with sufficient certainty to justify an award.

Applicable Provisions

The decision does not quote any statutory provision. It construes clause nine of the rental contract, which provides:

Ninth. The tenant shall pay the cost of the licenses necessary for the conduct of the bar located in the premises rented, although said licenses are and shall be the property of the landlord.

This clause is the textual basis for the Court's allocation of duties: the landlord applies for and takes out the licenses, while the tenant bears the cost.

The decision also sets out clause two of the contract, which provides:

Second. That they have agreed to the rental of the said building and furniture, and in order that it shall formally appear they execute the present document, by virtue of which they solemnly declare: That Doña Flora Broto rents the building above described, and the furniture and goods therein contained, to Don Agustin Garcia Gavieres, who in his turn accepts the same, according to the inventory made and signed in duplicate, one copy for each of the parties, in order that the said Gavieres may use and enjoy the same as a good tenant.

This clause describes the subject of the lease and the tenant's right to use and enjoy the premises as a good tenant, which frames the landlord's duty to secure to him the benefits of the license.

Ruling

On the first issue, the Court held that clause nine clearly imposed upon the landlord the duty of applying for and taking out the necessary licenses, the only obligation of the tenant being to pay therefor. The Court found that this was the construction placed on the contract by the parties themselves, as shown by the landlord's own testimony that it was in the contract that they were the persons who should apply for the license, but that the tenant was to pay for it. The Court also rejected the tenant's claim that the landlord was bound to advance the cost and recover it in installments, because nowhere in the written contract was that duty imposed, and the payment of the first license in installments did not establish a modification of the written terms.

On the second issue, the Court held that the landlord, having applied for a renewal of the license for the latter half of the year 1903, and the tenant having formally declined to advance the amount necessary to secure the renewal, the failure to secure it was due to the tenant's fault. The tenant was therefore not entitled to damages on that ground.

On the third issue, the Court held that the landlord was clearly at fault in having the unexpired portion of the license for the first half of the year cancelled at the same time that she withdrew her application for a renewal. The tenant had reimbursed her for the full amount expended therefor, and under the terms of her contract it was clearly her duty, the tenant having paid for the license, to secure to him, as far as in her power lay, the benefits to be derived therefrom. The tenant's refusal to advance the renewal amount in nowise justified the cancellation of a license she had sold or ceded to him.

On the fourth issue, the Court held that while the tenant was entitled to damages for losses sustained from the closing of the bar until the thirtieth of June, when the license expired, he failed to establish the amount with certainty. There was no evidence of the precise day or hour the bar was closed, nor satisfactory evidence of the daily losses, and it did not appear how much the profits were affected by the cancellation. Since the tenant failed to establish definitely the amount of his damages, no judgment could be rendered in his favor.

Doctrine

A lease of a building together with a going bar and restaurant, where the contract provides that the tenant shall pay the cost of the licenses although the licenses are and shall be the property of the landlord, imposes on the landlord the duty of applying for and taking out the licenses, and on the tenant only the duty of paying therefor. The landlord who has ceded a license already paid for by the tenant must secure to the tenant, as far as in her power lies, the benefits of that license, and her cancellation of it before expiry is a breach of contract. A party whose own refusal to pay the cost of renewal causes the failure to renew cannot recover damages for that failure. Finally, damages must be proved with reasonable certainty; where the evidence does not fix the amount of the loss, no award can be made.

Disposition

The Supreme Court affirmed the judgment of the trial court, without costs to either party in the Supreme Court or in the court below.

Remember This

Memorize the allocation: the landlord applies for and takes out the licenses, the tenant pays for them, and a landlord who cancels a license already paid for by the tenant breaches the contract. Examiners use this case to test contract construction from the parties' own conduct and the rule that damages must be proved with certainty.