LEONOR J. VDA. DE JAVELLANA, PETITIONER, VS. COURT OF APPEALS AND MOBIL OIL PHILIPPINES, INC., RESPONDENTS.

APPEAL by certiorari from
the judgment of the Court of Appeals (now known as the Intermediate
Appellate Court) in CA-G.R. No. 50108-R,
entitled:  “Mobil Oil Philippines, Inc., plaintiff-appellee,
versus Leonor J. Vda. de
Javel­lana and Shell Refining Company (Phil.), Inc., defendants-appellants,” insofar as it
denied herein petitioner’s claim for
damages.

The facts of the case are not disputed.  Briefly stated, they are as follows:

The petitioner Leonor
J. Vda. de Javellana is the re­gistered owner of three (3) contiguous
parcels of land, with an aggregate area of 1,549 square meters, situated along Buendia Avenue, Makati, Metro Manila.  The place was found suitable for a gasoline
station so that on December 20, 1969, she executed an option to lease the said
pro­perty in favor of the herein private respondent, Mobil Oil Philippines,
Inc. (Mobil, for short).  Said option
read, in part as follows:

“This option may be exercised by the optionee
within a period of 60 days from the date hereof, and if not so exercised or
executed within the stated period, this option shall cease and come to an end, and the consideration paid
herein shall automatically be forfeited
to the optionor, otherwise, said amount shall form
part of the first payment of the lease.”^[1]

As agreed upon and understood by the parties, Mobil had up to February 18, 1970 within which to
exercise its option.

On July 31, 1970,
however, Javellana leased the same property to the
Shell Refining Company (Phil.), Inc. (Shell,
for short) and received the amounts of P120,000.00, as advance rental on the property, and P20,000.00, for demolition expenses.^[2]

As a result, Mobil, claiming that it had exercised its option to
lease the property, filed an action before the Court of First Instance of Rizal against Javellana and Shell
to declare the lease agreement
between Javellana and Shell null and void and of no legal effect, and to compel Javellana to execute and sign a lease agreement in its
favor.  Mobil also prayed that both
defendants be ordered to pay damages and attorney’s fees; and that a writ
of preliminary injunction be issued to restrain the defendants from
implementing the lease agreement in ques­tion and from constructing and/or
installing a gasoline station or structure of whatever nature on the property
during the pendency of the case.^[3]

Javellana denied all the material
averments of the complaint and claimed, by way of affirmative defense, that the
complaint stated no cause of action, and that Mobil failed to exercise its
option to lease her property within the stipulated period.  As counterclaim, she asked that Mobil be
adjudged to pay her the amounts of P100,000.00, for
moral damages; P30,000.00, for exemplary damages; and P20,000.00, for attorney’s fees and expenses of litigation.^[4]

Shell also denied the material averments of the complaint and
alleged, as affirmative defenses, that the option to lease was not valid or
binding on third parties the same not being in a public instrument duly
registered in the office of the Register of Deeds; that there was no valid
exercise of the option to lease because plaintiff availed of it only after the
60-day period had elapsed; that the
lease agreement entered into by and between Javel­lana
and Shell was valid, legal and binding not only on the parties to the said
agreement but also on plaintiff Mobil because it was executed in compliance
with all the require­ments of the law and registered with the office of the
Register of Deeds; that the alleged exercise of the option by plaintiff Mobil
is not provable under the provisions of the Statutes of Fraud; and that Mobil
not having any right over the properties in question cannot restrain Shell from
making use of said properties having leased the same from its owner.

By way of counterclaim, Shell alleged that Mobil was liable to it
for unjustifiably compelling Javellana to violate her
obligations under their lease agreement; that by reason of the unjustified
filing of the case said defendant could not proceed with the construction and
oper­ation of gasoline station in the properties in question resulting in loss
of expected profits; that the non-con­struction of the said gasoline station
would cause losses to the corporation because it will be paying rentals to Javellana at the rate provided for in the Lease Agreement
although in the meantime it cannot make use of the property for the purpose for
which they were leased and that by reason of the filing of the case it incurred
litigation expenses, including attorney’s fees in the amount of P10,000.00.

Shell also filed a cross-claim against Javellana
claiming that it had been assured by Javellana at the
time of the execution of their lease agreement that the option to lease in favor of Mobil had expired without the latter having
taken advantage thereof; that Javellana should
indemnify Shell for whatever amount it should be ordered to pay Mobil, as well
as damages and expenses of litigation.^[5]

Meanwhile, on August 17, 1970, or two days after the filing of the original complaint, the trial
court issued a temporary restraining order, restraining Javellana
from leasing and/or encumbering the property in question to third parties and
from constructing thereon any building
or structure of whatever nature, until further orders from the court.  Said restraining order was reiterated on Sep­tember
9, 1970, upon the filing of the second amended complaint impleading
Shell, and Shell was likewise re­strained from implementing the lease agreement
and constructing or installing on the property a gasoline station or any other
kind of structure.^[6]

After trial, the lower
court found that Mobil had duly exercised its option to lease the property of Javel­lana and rendered judgment, as follows:

“In view of all the foregoing, judgment is hereby rendered in
favor of the plaintiff and against the
defendants:

“1. Making permanent the writ of preliminary
prohibitory injunction heretofore issued by this court;

“2. Ordering the issuance, upon the filing by the
plaintiff of a bond in the amount of P50,000.00
of a writ of preliminary mandatory injunc­tions ordering the defendant and/or
persons acting under them to turn over
to the plaintiff the physi­cal possession of the lots covered by Transfer Cer­tificate
of Title Nos. 25426 and 15427 in the name of Leonor Vda. de Javellana,
of the Registry of Deeds of Rizal, and authorizing
the plaintiff and/or persons acting under it to construct a gasoline station
and to operate the same;

“3. Declaring the Lease Agreement, Exhibit 1-Shell,
null and void and of no force and effect;

“4. Ordering the defendant Javellana
to exe­cute the Lease Agreement, Exhibit B-1, provided that all the terms and
conditions agreed upon by the plaintiff and the defendant Javellana
appear­ing in the option, Exhibit B, are incorporated therein;

“5. Condemning the defendants, jointly and
severally to pay to the plaintiff the amount of P51,750.00
as and by way of compensatory and exem­plary damages, plus attorney’s fees of
P10,000.00;

“6. Condemning the defendant Javellana
to return to the defendant Shell
the amount of P140,000.00
paid by it to said defendant
Javellana;

“7. Dismissing the
counterclaim of defend­ants, and the cross-claim of Shell against Javel­lana except the aforesaid amount of P140,000.00;

“8.
Ordering the defendants to pay the costs of suit.”^[7]

On appeal, however,
the respondent Court of Appeals found
that Mobil failed to exercise its option within the stipulated period; hence,
the lease contract between Javellana and Shell is
valid and should be given legal effect. 
The appellate court further found that the institution of the suit by
Mobil and the issuance of the writ of preliminary injunction at its instance
had decidedly damaged and prejudiced Javellana and
Shell – “On the part of Javellana, she
was deprived of the rentals due her by reason of her contract with Shell, all
of which she ought to recover in
her counterclaim.” But, the appellate court, although it reversed the
judgment, did not grant damages to Javellana because
her counter­claim had been dismissed by the trial court and said dismissal was
never raised nor questioned by her on appeal, much less assigned as an error
and discussed in her brief.^[8]

Unable to obtain a reconsideration of the judgment,^[9]
the petitioner filed the present recourse.

The issue is whether or not the petitioner is entitled to an award
of damages for the wrongful filing of a case against her and the improvident
issuance of a writ of pre­liminary mandatory injunction, notwithstanding the
fact that her counter-claim for such
damages had been dismissed by the trial court and she had not assigned such
dismissal, as an error in her brief filed with the respondent appel­late court.

The petitioner claims that the refusal of the respon­dent
appellate court to award damages to her despite its findings that she had
incurred damages by reason of the acts of Mobil, runs counter to the doctrine
that errors may be considered if plain or otherwise necessary to arrive at a
just decision, and would sacrifice the ends of jus­tice to empty
technicality.  She further claims that
the prayer in her brief that the decision appealed from should be reversed in toto, coupled with the findings of the respondent appellate court that she had
actually suffered damages as a consequence of the acts of Mobil, constitute
ample justification for awarding her damages.

Traversing the argument, Mobil
contends that the respondent appellate court correctly ruled that the
peti­tioner is not entitled to
damages since she failed to appeal from
the dismissal of her counter-claim for damages, nor did she assign such
dismissal as error and argued the same in her brief.

After a careful review and perusal of the entire records of the
case, the Court finds the stand of the petitioner meritorious.

The general rule is
that only errors which have been stated in the assignment of errors and properly
argued in the brief will be
considered, except errors affecting jurisdiction over the subject-matter and
plain, as well as clerical, errors.

But while the petitioner Javellana did
not assign as error the failure
of the trial court to adjudge recovery and to award damages, We
feel that there is sufficient justification to set aside the judgment in this
respect.  For, the error is patent.  Under Section 7, Rule 51 of the Revised Rules
of Court, the Court of Appeals
is given an option to consider and pass upon a proven error notwithstanding the
fact that it was not specifically
assigned and argued in the brief.

Besides, an unassigned error closely related to the error
properly assigned, or upon which the determination of the question raised by
the error properly assigned is dependent, will
be considered by the appellate court notwithstanding the failure to assign it as error.^[10]

At any rate, the Court is clothed with ample authority to review
matters, even if they are not assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a just decision of
the case,^[11] and, We find it unfair and unjust to deprive
the petitioner of the rentals on her property due to a mere technicality.

The contract of lease executed by and between the petitioner Javellana and Shell stipulated that the lease shall be for
a period of twenty (20) years, subject to cancellation at the exclusive option of Shell at the end of the 10th and/or
15th year, by notifying Javellana in writing at least
30 days prior to the end of the said 10th or 15th year; and that
Shell shall pay Javellana, as rentals on the
property, the following amounts:

1. P5,000.00, per month, during the 1st up to the 5th year of the lease;

2. P6,000.00, per month, during the 6th
up to the 10th year of the lease;

3. P7,000.00, per month, during the 11th
up to the 15th year of the lease; and

4. P8,000.00, per month, during the 16th up to the 20th year of the lease.

The contract of lease was executed on July 31, 1970, so that the
rentals which Javellana would have received were it
not for the filing of the case by Mobil and the improvident issuance of a writ
of preliminary injunction at the
instance of Mobil, was P912,000.00, up to the end of the 13th year
on July 30, 1983.  But, since she had
been given an advance rental of P120,000.00 by Shell,
the accrued rental due her is P792,000.00.  Consequently, Mobil is hereby ordered to pay Javellana the amount of P792,000.00, with interest thereon at the
legal rate from finality of judgment until the same is fully paid, plus the
amount of P7,000.00,
per month, from July 31, 1983, until the possession of the property in question
is returned to Javellana.  Mobil is further ordered to pay Javellana the amount of P20,000.00,
for attorney’s fees and expenses of litigation.

WHEREFORE, with the modification above-indicated, the
judgment appealed from should be, as it is hereby, AFFIRMED in all other
respects.  With costs against the
respondent Mobil Oil Philippines, Inc.

SO ORDERED.

Makasiar, (Chairman), Guerrero, Abad Santos, and Escolin, JJ., concur.

Aquino, J., no part.

De Castro, J., on sick leave.

^[1] Record on Appeal, p. 20.

^[2] Id., p. 67.

^[3] Id., p. 10.

^[4] Id., p. 53.

^[5] Id., p. 116.

^[6] Id., pp. 41, 114.

^[7] Id.,
p. 232.

^[8] Rollo, p. 26.

^[9] Id., pp. 41, 52.

^[10] Hernandez vs. Andal, 78 Phil. 196.

^[11] Ortigas vs. Lufthansa
German Airlines, G.R. No. L-28773, June 20, 1975; 64 SCRA
610.