G.R. No. 61932. June 30, 1987
ENRIQUE P. SYQUIA, PETITIONER, VS. THE HONORABLE COURT OF APPEALS AND EDWARD LITTON, RESPONDENTS.
PARAS, J.:
Before Us is an appeal by certiorari from the split
decision[1]
of a division of five of the Court of Appeals dated March 16, 1982 as well as that resolution of the
Court of Appeals denying petitioner’s Motion for Reconsideration.
The instant action arose from an ejectment
case against petitioner by Edward Litton based on the expiration of the
Contract of Lease over the Dutch Inn Building originally owned by the heirs of Doña Rosa Litton or the Litton co-ownership who leased it
to Litton Finance and Investment Corporation.
The latter sublet it to herein petitioner for a period commencing on February 1, 1970 and ending on January 31, 1979.
On August 9, 1976, the
Litton co-ownership was dissolved by partition (Exh.
“E”) and the ownership of the Dutch
Inn Building
and the lots on which it is built was adjudicated to herein private respondent
Edward Litton. On December 1, 1976, the latter gave notice in writing (Exh. “F”) that as the new owner of said
properties, rentals of the same should be remitted to him starting January, 1977. Petitioner
signified his conformity (Exh. “F-1”) to
this notice and accordingly paid his rentals directly to private respondent.
On December 1, 1978, petitioner
wrote to respondent manifesting his willingness to renew the contract of lease
upon its expiration on January 31, 1979
under such terms as may be agreeable to both of them (Exh. “I” for petitioner and Exh.
“S” for respondents).
A series of
communications ensued between them, private respondent, thru counsel,
consistently invoking the clear and unequivocal terms of the contract of lease
(Exh. “G”) especially the duration thereof
which allegedly does not provide for renewal or extension. On December 15, 1978 and thereafter on January 4, 11 and 22, 1979, private respondent, thru
counsel, asked petitioner in writing to vacate the premises on or before the
expiration of the lease contract on January 31, 1979, and upon his failure to vacate the premises after the expiry date of the lease
contract, he should pay the amount of P58,685.00 per month as compensation for
the use and occupation of the premises (Exh.
“L”). Petitioner objected to
the amount as not being fair and reasonable rental, petitioner invoking the
huge investment he has put in the Dutch
Inn Building
from 1970 to 1979 and also the alleged verbal assurance plaintiff-appellee’s predecessor-in-interest of petitioner’s
priority to renew the lease of the premises in question.
Upon petitioner’s refusal to vacate the premises upon written
demand made by private respondent on February 1, 1979, private respondent filed
the case for ejectment based on the expiration of the
Contract of Lease, the City Court rendered a decision[2]
in favor of plaintiff Edward Litton (herein private respondent) and ordered
defendant, Enrique Syquia (herein petitioner) to
vacate the premises and to pay plaintiff Litton, P31,781.16 a month as the
reasonable value of the use and occupation of the premises from February 1,
1979 until defendant Syquia vacates the premises, the
amount of P3,000.00 as attorney’s fees and the costs. On appeal to the RTC (then CFI), the judgment[3]
was slightly modified in that the monthly rental was reduced to P28,000.00,
less any amount that defendant may have deposited with the court and withdrawn
by the plaintiff and that defendant’s counterclaim was dismissed for lack of
merit.
The case was elevated to the Court of Appeals by way of Petition
for Review under Republic Act 6031, with Syquia
assailing the aforementioned decision.
The appellate court upon a split vote of four Justices concurring to
one dissenting, affirmed the decision of the lower court and dismissed the
petition for review. Hence this appeal,
petitioner relying on the following arguments:
A
Respondent Court of Appeals has decided
this case not in accord with law as well as applicable decisions of the Supreme
Court.
B
Respondent Court of Appeals has gravely
erred in its interpretation and application of Art. 1403 of the Civil Code of
the Philippines
and likewise erred in its failure to correctly apply Section 7, Rule 130 of our
Rules of Court.
C
Respondent Court of Appeals has committed
grave abuse of discretion amounting to lack of jurisdiction in affirming the
lower Court’s award of increased rental and/or reasonable compensation for the
use of the premises in question
in the amount of P28,000.00 a month.
D
Respondent Court of Appeals has committed
grave abuse of discretion in its failure to extend petitioner’s stay in the
leased premises.
E
Respondent Court of Appeals has likewise
erred in its failure to award unto petitioner
the reasonable amount of damages
and/or compensation as has been proven by
him and unrebutted by private respondent.
F
Respondent Court of Appeals has committed a
grave abuse of discretion in its failure to
extend petitioner’s stay in the leased premises.
G
Respondent Court of Appeals has likewise
erred in its failure to award unto petitioner the reasonable amount of damages
and/or compensation as has been proven by him and is more than substantially
shown by the records. (pp. 29-30, Rollo)
To have a better grasp of the facts and issues of the case, We
find it necessary to quote the pertinent portion of the judgment of the
Regional Trial Court, to wit:
“After a careful perusal of the evidence of both parties,
their arguments and their memoranda, the court finds that the principal issue
is whether or not the defendant is entitled to a renewal of the contract of
lease, Exhibit “G”, which on its face, expired on January 31, 1979.
In other words, can the alleged verbal assurances of George
Litton Sr. and Gloria Litton del Rio be sufficient basis
to vary the written contract and allow the defendant an extension of the lease
contract, which, on its surface, already expired on January 31, 1979? There
is no dispute that the contract of lease, Exhibit “G”, entered into
by and between the defendant and plaintiff’s predecessors-in-interest, has
been terminated by its express provision appearing in paragraph 1, which states
that the lease shall be for a period of nine (9) years commencing on January 1,
1970 and
ending on January 31, 1979.
“Defendant claims that this case was filed prematurely
considering that he is entitled to a renewal of the contract, that one of the
inducements which made him enter into a lease agreement with plaintiff’s
predecessor-in-interest was the oral assurance of said plaintiff’s
predecessor-in-interest that the defendant is entitled to a renewal or a
priority to lease the premises upon the expiration of the contract of lease;
that in view of the close relationship then existing between the defendant and
George Litton Sr. and Gloria Litton del Rio and the trust and confidence relied
by defendant on both parties,
defendant did not insist on the insertion of the provision regarding his
priority to lease the premises in Exhibit “G”; that Exhibit
“G” is merely a copy of a previous contract of lease, Exhibit “12”; that when defendant pointed to
George Litton Sr. and Gloria Litton del Rio of his priority to lease the premises, the latter assured him
that he should not worry regarding the absence of the option to renew the lease contract, Exhibit
“G” because he would be given priority to lease the premises upon the expiration of the lease contract;
that because of this verbal assurance of George Litton Sr. and Gloria Litton
del Rio, and that plaintiff, having assumed or acquired the rights and
obligations of the former when he became the owner of the property subject of
this case, the plaintiff is now duty-bound to respect the verbal assurance
given by the plaintiff’s predecessor to give
him a renewal or priority to a
new lease over the property and that defendant should now be made to exercise his option to renew the lease. In other words, plaintiff should be compelled to abide by the commitment
made by his predecessor-in-interest.
“Defendant further claims that he is entitled to exercise his option to extend or renew the lease
considering the huge investment he has made on the Dutch
Inn Building. Plaintiff, however, insists that by the
expiration of the contract of lease, he has the right to demand to take action for unlawful detainer and that defendant should vacate the premises and
to pay the amount of P58,685.00 as
monthly rental, which is the
reasonable compensation for the use of the premises after January 31, 1979.
“From his testimony in the lower court, defendant stated that
he was assured or promised by George Litton Sr. and Gloria Litton del Rio,
representatives of the Litton Finance & Investment Corp.; that he,
defendant, Enrique Syquia, would be given priority to
lease the same property after the expiration of the lease contract.
“According to the plaintiff, there is infringement of the
Statute of Frauds as well as the Parol Evidence
Rule. On the other hand, the defendant
invokes the exception contained in Section 7, Rule 130 of the Rules of Court (Parol Evidence Rule).
Defendant contends that antecedent factors were involved which induced
him to enter into the contract of lease with Litton Finance & Investment
Corp. This brings us to the provision of
Statute of Frauds under Article 1403, No. 2(e), which provides as follows:
‘Art. 1403. The following
contracts are unenforceable unless they are ratified:
(1) xx xx xx
(2) Those that do not
comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter
made shall be unenforceable by action,
unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary evidence of
its contents:
(a) x xx xxx
(b) x xxx xx
(c) x xx xxx
(d) x xx xxx
(e) An agreement for
the leasing for a longer period than one year, or for the sale of real property
or of an interest therein.’
So, under 2(e) of Article 1403 of the Civil
Code as quoted above, the alleged oral assurance or promise of the representatives
of the Litton Finance & Investment Corp. that defendant should be given
priority or a renewal of Exhibit “G” cannot be enforceable against
plaintiff. Likewise, under the Parol Evidence Rule, defendant’s claim that he is entitled
to a renewal of the contract of lease for the reason that the lessors have given him the option to renew the contract
cannot be maintained. The Parol Evidence Rule, Sec. 7, Rule 130 of the Rules of Court
provides:
‘When the terms of an agreement have been reduced to writing, it is to be considered as
containing all such terms, and therefore, there can be, between the parties and their successors in interest, no
evidence of the terms of the agreement other than the contents of the writing,
except in the following cases:
(a) Where a mistake
or imperfection of the writing, or its failure to express the true intent and
agreement of the parties, or the validity of the agreement is put in issue by
the pleadings;
(b) When there is an
intrinsic ambiquity in the writing.
The term “agreement” includes wills.’
“Applying the Parol Evidence Rule to the instant case, it is clear that
there being a written agreement between the parties, the same should be
controlling between them. The exceptions
provided for in (a) and (b) cannot apply in the instant case in view of the
fact that the contract of lease, Exhibit “G” is clear, thus
precluding any mistake or imperfection or failure to express the true intent and agreement of the parties. The court cannot see any ambiguity in the
contract. The tests of completeness of a
written contract is the contract itself, as provided for under Sec. 1494 of
Jones on Evidence x x x.
“Following these doctrines, there is absolutely no room to read into Exhibit “G”, the alleged extension or
renewal or assurance of priority to lease
after the contract shall have expired, because the document is in itself,
complete, and no ambiquities can be ascribed to its
terms and neither is there any mistake or imperfection or failure to express
the true intent and agreement of the parties therein, simply because the
provisions for extension or renewal are not found in or capable of being
inferred from the express terms of Exhibit “G”. It is significant to note that defendant
failed to point out the mistake or imperfection or failure to express the true
intent and agreement of the parties or any ambiguity of the contract.
xxx xxx xxx xxx
“The testimony of the defendant that there was an oral
understanding between him and the representatives of Litton Finance &
Investment Corp. to be allowed to extend or renew or be given priority to lease
the property at the expiration of the contract of lease on January 31, 1979 is
belied by his letter to plaintiff dated December 1, 1978, which is inconsistent
to what all along said defendant had professed.
This is shown by paragraph 2 of the letter marked as Exhibit
“S” for the plaintiff and Exhibit “1” for the defendant:
‘Since our contract of lease will terminate on January 31, 1979, we are writing you this letter to inform you that we
are willing to renew said
contract under such terms as may be agreeable to both of us.’
It is significant from this portion of the
letter that the defendant never mentioned his option or priority to lease the
property. It is the observation of the court that the alleged verbal assurance
of George Litton Sr. and Gloria Litton del Rio is only an afterthought of the
defendant. It is merely an eleventh
hour defense of the defendant when
the plaintiff refused to renew the contract.
The inference of said letter is very clear. That the defendant had no right or preference
to renew the contract and that was the reason why he was requesting to
negotiate for the renewal of the contract.
“Assuming for the sake
of argument that there really was a verbal agreement or promise on the part of George Litton Sr. and
Gloria del Rio to allow
defendant to renew the contract of lease at its expiration, the court believes
that such assurance or promise would not have any binding effect on the
original lessor, the Litton Finance & Investment
Corporation, considering that defendant did not adduce any evidence to show in
what capacity George Litton Sr. and Gloria Litton del Rio gave that assurance
and considering further that it was James Litton who signed the contract of
lease, Exhibit “G” in representation of Litton Finance &
Investment Corporation as its director-vice-president. Under the Corporation Law, ‘corporation’s
acts are only valid if a board resolution authorizes said acts, otherwise, said
unauthorized acts are not binding to it.’ The evidence does no show that the act of George Litton
Sr. and Gloria Litton del Rio had been ratified.
“The last issue is the
reasonable compensation for the use and
occupation by the defendant of the
premises in question. The lower court
fixed the reasonable compensation in the amount of P31,781.16 a month. This court cannot understand how the lower
court reached at that alleged reasonable monthly compensation.
“Antonio Doria, the expert witness, presented by the defendant
appears to be a neutral and unbiased witness.
Under cross-examination by the plaintiff,
he testified as follows:
xxx xxx xxx xxx.”
(pp. 141-155, Rollo)
From the foregoing, it is crystal clear that the court a quo
did not whimsically decide the case, nor decide it without substantial basis in support thereof.
In dismissing the petition of appellant Syquia,
respondent Court of Appeals relied heavily on the findings of fact of the Regional Trial Court and
concluded that there is “a
lot more than substantial evidence supporting the court a quo’s
finding of fact and that the conclusions arrived at by his honor are clearly
not against the law and jurisprudence.” The case involves unlawful detainer and respondent Court of Appeals correctly applied
the “substantial evidence” rule as provided for under R.A. 6031, amending Section 45 Judiciary Law
of 1948. Said Act which was applied in
the case of Gindoy vs. Tapucar,[4]
provides that “in cases falling under the exclusive original jurisdiction
of Municipal and City Courts[5]
which are appealed to the Court of First Instance,[6]
the decision of the latter shall be final, provided, that the findings of facts
contained in said decision are supported by substantial evidence as basis
thereof, and the conclusions are not clearly against the law and jurisprudence.“[7]
It is noted that petitioner is among other things a successful
and experienced businessman. Considering
his huge investment made on the building, he should have taken steps to protect
his investment within the protective mantle of the law by insisting that the
alleged verbal assurance be reduced into writing. His failure
to do so has considerably weakened his claim.
Proof of the alleged verbal assurance of a lease renewal cannot be allowed both under
the Parol Evidence Rule and the Statute of Frauds for
failure to put in writing said alleged stipulation. Upon the other hand We are inclined to consider
Syquia as having constructed in good faith the
improvements he introduced in the Dutch
Inn Building. His rights to said improvements are governed
by Art. 1678 of the Civil Code which provides:
“Art. 1678. If the
lessee makes, in good faith, useful improvements which are suitable to the use
for which the lease is intended, without altering the form or substance of the
property leased, the lessor upon the termination of
the lease shall pay the lessee one-half of the value of the improvements at
that time. Should the lessor refuse to reimburse said amount, the lessee may
remove the improvements, even though the principal thing may suffer damage
thereby. He shall not, however, cause
any more impairment upon the property leased than is necessary.
“With regard to ornamental expenses, the lessee shall not be
entitled to any reimbursement, but he may remove the ornamental objects,
provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value
at the time the lease is extinguished.”
Petitioner admits the fact of ownership of the private
respondent over the building in question.
As the owner, it is only logical that he should have the freedom to
choose the tenant of the premises under such terms and conditions as may enable
him to realize reasonable and fair returns therefrom. Since petitioner stubbornly refused to vacate
the premises despite repeated demands of respondent, he should be obliged to
compensate the latter such amount as may be deemed fair and reasonable under
the circumstances. What then is
reasonable? An expert witness in the
person of Mr. Antonio Doria testified in the court
below and thus established that P28,000.00 is fair and reasonable rental under
the premises. However, judicial notice
is requested by private respondent of the runaway inflation which supervened
since January 31, 1979, contending that had the premises been vacated at the expiration of the contract on
January 31, 1979, the latter (private respondent) could have leased it immediately to other interested parties under such
terms that could have taken into consideration the inflation rate at the time
and provided for periodic rate escalation corresponding to subsequent
inflation. He contends likewise that
petitioner is a possessor in bad faith with his continued enjoyment of the
premises after the expiration of the lease.
We cannot grant the foregoing prayer of private respondent
without denying due process of law to petitioner. While We can take judicial cognizance of the
fact of inflation, there is no sufficient evidence presented to subtantiate respondent’s claim of his actual loss in
petitioner’s failure to surrender the premises.
We now come to the next assignment of error. The instant case is not within the scope of
Art. 1687 of the Civil Code which
covers lease contracts with no fixed period.
The contract of lease in question is with a definite period. Thus to extend the lease of petitioner would
be completely devoid of legal basis, inasmuch as the stipulated period of the
contract between the parties had already expired and private respondent is
unwilling to extend the same. There is
no way therefore that herein petitioner can hold on to the property after January 31,
1979 without
conformity of plaintiff-appellee.
WHEREFORE, premises considered, the assailed
decision is hereby AFFIRMED, with
the modification that this case is hereby REMANDED
to the Regional Trial Court involved, for the determination of the
parties rights under Art. 1678 of
the Civil Code (supra).
SO ORDERED.
Fernan, (Chairman), Gutierrez, Jr.,
Padilla, Bidin, and
Cortes, JJ., concur.
[1]
Penned by Honorable Justice Ramon G. Gaviola, Jr.,
with Honorable Justices B.S. de la Fuente, Porfirio V. Sison, Isidro Borromeo, concurring; and Honorable Justice Onofre A. Villaluz, dissenting.
[2]
Written by Honorable Judge Bienvenido S. Salamanca.
[3]
Decided by Honorable Judge Alfredo C. Florendo
[4]
75 SCRA 38.
[5]
Now known
as the Metropolitan Trial Courts.
[6]
Now known as Regional Trial Courts.
[7]
Section 7, Rule 130, Rules of Court.