SECOND DIVISION
THE INSULAR LIFE
ASSURANCE COMPANY, LTD.,
Petitioner,
G.R.
No.
126850
April 28, 2004
-versus-
COURT OF APPEALS
AND SUN BROTHERS & COMPANY,
Respondents.
D E C I S I
O N
AUSTRIA-MARTINEZ,
J.:chanroblesvirtuallawlibrary
chanroblesvirtualawlibrary
Before the Court is a petition
for review on certiorari under Rule 45 of the Rules of Court which
seeks
the reversal of the Decision,[1]
dated May 20, 1996, of the Court of Appeals (CA for brevity) in CA-G.R.
CV No. 46987 affirming the Decision,[2]
dated April 25, 1994, rendered by the Regional Trial Court (Branch
150),
Makati City (RTC for brevity) in Civil Case No. 92-27754 extending the
lease contract subject of the petition for declaratory relief and
ordering
petitioner to pay attorney’s fees and costs.chanrobles virtuallaw libraryred
The factual antecedents
are as follows:
On September 24, 1992,
Sun Brothers & Company (Sun Brothers for brevity) filed a petition
for declaratory relief with the RTC seeking judicial interpretation of
the "option to renew" clause under a Contract of Lease dated September
20, 1988.[3]
Under the contract,
Sun Brothers leased for a period of five years from December 1, 1987
until
November 30, 1992, a parcel of land, with an approximate area of 4,215
square meters, and the building constructed thereon, located in Makati
(then a Municipality). The contract stipulated that the lease was
renewable
at the option of the tenant, Sun Brothers, for an additional five
years,
provided the exercise of the option to renew the lease shall be made by
the tenant in writing to The Insular Life Assurance Company, Ltd.
(Insular
for brevity) at least ninety days before the expiration of the period.
The contract further provided for monthly rental of P50,000.00 for the
first year and an increase of 10% per annum for the succeeding years,
exclusive
of real estate taxes and insurance premiums which are for the account
of
Sun Brothers.[4]
Sun Brothers alleged
that since the lease contract does not contain any provision as to the
rental or any provision for any new or additional terms or conditions
in
case of renewal, the terms and conditions of the renewal of lease
should
be the same and the monthly rental should remain at P73,205.00. It
prayed
that judgment be rendered: (a) declaring that renewal under the
contract
of lease be for an additional period of five years under the same terms
and conditions and the monthly rental should be P73,205.00; and, (b)
ordering
Insular to pay Sun Brothers P20,000.00 as attorney’s fees and to pay
the
costs of suit.[5]chanrobles virtuallaw libraryred
On November 6, 1992,
Insular filed its Answer[6]
claiming that while the lease contract grants Sun Brothers the option
to
renew the lease by giving notice thereof to Insular at least ninety
days
before the expiration of the period, it has always been the agreement
of
the parties that Sun Brothers does not have the right to impose, on its
sole will, a renewal of the lease as to the period or the rentals;[7]
that despite the presence of the renewal clause in the previous
contracts
of lease, the parties still negotiated, as a matter of course, for the
renewal of the lease in 1977 and 1987; that negotiation was the usual
norm
between the parties, clearing up as it did vague portions of the
previous
contracts.cralaw:red
After trial on the merits,
the RTC rendered its decision, dated April 25, 1994, ruling as follows:
The wording of the xxx
provisions of the contract is clear, unambiguous and need no further
interpretation.
The tenant, herein petitioner, is vested solely with the option to
renew
the said contract of lease on the only condition that the same be made
known to respondent in writing at least 90 days before its expiration.cralaw:red
Petitioner, in its letter
to respondent dated May 22, 1993 (Exh. "D"), expressed its desire to
exercise
the option granted in the contract, since there is no mention of any
change
or increase in the amount of monthly rental, petitioner understood it
to
mean that the renewal will be under the same terms and conditions.cralaw:red
Respondent’s claim that
the lease contract (Exh. "C") does not contain the true intent of the
parties
deserves scant consideration. It must be noted, as correctly pointed
out
by the petitioner, that all the contracts of lease between the parties
and the repeated renewals thereof were entirely drafted, finalized and
notarized by respondent and is, thus, a contract of adhesion. Being a
contract
of adhesion, petitioner’s only role was for its general manager,
Amancio
L. Sun to sign the same. The respondent could have easily deleted this
questioned renewal clause in the contract if, indeed, such was not the
intention of the parties. It could have provided therein that any
renewal
of the lease would be by mutual agreement of the parties or had
specifically
limited the period of the lease.[8]chanrobles virtuallaw libraryred
The dispositive portion
of the assailed decision reads:
WHEREFORE, considering
all the foregoing, judgment is hereby rendered as follows:
a) declaring that the
contract of lease dated 30 September 1988 be renewed for another 5
years
starting from 30 November 1992 and up to 1 December 1997;
b) declaring that the
monthly rental on the leased premises be P100,000.00 exclusive of real
estate taxes and insurance premiums, less any amounts that petitioner
may
have paid respondent in the meantime;
c) ordering the respondent
to pay herein petitioner the amount of P20,000.00 as attorney’s fees;
and
d) to pay the cost.cralaw:red
SO ORDERED.[9]
On June 1, 1994, Insular
filed a motion for reconsideration[10]
which the RTC denied in its Order dated July 18, 1994.[11]
Dissatisfied, Insular
appealed to the CA.[12]
In a Decision dated May 20, 1996, the CA affirmed the decision of the
trial
court.[13]
It reasoned that since the renewal clause in the latest contract of
Insular
and Sun Brothers is silent as to the terms and conditions of the
subsequent
contract, such subsequent contract should follow the terms and
conditions
of the original contract, applying the doctrine laid down in the cases
of Ledesma vs. Javellana,[14]
Millare vs. Hernando,[15]
and Fernandez vs. Court of Appeals.[16]
As regards the monthly
rental, the CA held that there was no merit to Insular’s allegation
that
the trial court acted arbitrarily in fixing the amount of the rent at
P100,000.00
a month since it considered the testimony of Insular’s witness that
improvements
introduced by Sun Brothers still have an appraised value, which value
is
considered by the CA in favor of Sun Brothers in the determination of
the
terms of the extended lease. The CA added that the trial court arrived
at the amount of P100,000.00 after considering that Sun Brothers had
shouldered
the maintenance expenses on the building and paid real estate taxes as
well as insurance premiums thereon.[17]chanrobles virtuallaw libraryred
Insular filed a motion
for reconsideration[18]
which was denied by the CA in its Resolution dated October 10, 1996.[19]
Hence, the present petition
for review anchored on the following grounds:
A.
THE EXERCISE OF
JUDICIAL
POWER ENTAILS THE DUTY TO SETTLE ACTUAL CONTROVERSIES OF LEGALLY
DEMANDABLE
RIGHTS AND TO DECIDE UPON ISSUES SUBMITTED BY THE PARTIES.
B.
WHERE A PARTY PUTS
IN ISSUE IN HIS PLEADING THAT THE CONTRACT FAILS TO EXPRESS THE TRUE
INTENT
OF THE PARTIES, THE LOWER COURT IS MANDATED TO CONSIDER THE EXTRINSIC
EVIDENCE
PRESENTED AND THEN DECIDE WHAT THE TRUE INTENT IS; BY THE VERY NATURE
OF
THIS CHALLENGE, IT IS A JUDICIAL ABDICATION OF DUTY TO SIMPLY AND
MERELY
RULE THAT THE CONTRACT IS CLEAR AND MUST BE INTERPRETED AS SUCH.
C.
THE AMOUNT OF
REASONABLE
RENT IS DETERMINED ON THE BASIS OF EVIDENCE PRESENTED.
D.
PETITIONER IS ENTITLED
TO AN AWARD OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES.[20]
Succinctly, the issue
herein is the real nature of the option to renew the lease under the
contractual
agreement of the parties. Insular insists that the option to renew is a
bilateral agreement subject to the terms and conditions the parties may
agree upon. Sun Brothers, on the other hand, posits that the option to
renew is its unilateral right effectively exercised by mere notice to
Insular
of the intention to extend the lease, at least ninety days before the
expiration
of the period, without qualification as to monthly rental or term of
the
lease.cralaw:red
It is a settled rule
that in the exercise of the Supreme Court’s power of review, the Court
is not a trier of facts and does not normally undertake the
re-examination
of the evidence presented by the contending parties during the trial of
the case considering that the findings of facts of the CA are
conclusive
and binding on the Court.[21]
However, the Court had recognized several exceptions to this rule, to
wit:
(1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd
or impossible; (3) when there is grave abuse of discretion; (4) when
the
judgment is based on a misapprehension of facts; (5) when the findings
of facts are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are
contrary
to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are
conclusions
without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioner’s main
and reply briefs are not disputed by the respondent; (10) when the
findings
of fact are premised on the supposed absence of evidence and
contradicted
by the evidence on record; and (11) when the Court of Appeals
manifestly
overlooked certain relevant facts not disputed by the parties, which,
if
properly considered, would justify a different conclusion.[22]
Exceptions (4), (10) and (11) are present in this case.cralaw:red
It is a cardinal rule
in contract interpretation that the ascertainment of the intention of
the
contracting parties is to be discharged by looking to the words they
used
to project that intention in their contract, that is, all the words,
not
just a particular word or two, and words in context, not words standing
alone.[23]
Furthermore, Article 1374 of the Civil Code requires that the various
stipulations
of a contract shall be interpreted together, attributing to the
doubtful
ones that sense which may result from all of them taken jointly.
Conformably,
to ascertain the true meaning or import of the disputed "option to
renew"
clause in the contract of lease, the entirety of the contract must be
considered;
not merely the clause relating to the "option to renew."chanrobles virtuallaw libraryred
After a careful examination
of the records of the case, the Court finds it significant that the
disputed
contract of lease is not the first contract between the parties but, in
fact, the third contract or the second renewal contract. The parties’
lessor-lessee
relationship all started on January 29, 1958, with the original
contract
of lease,[24]
portions of which provide:
I
INSULAR does hereby
lease the abovementioned land and building unto the TENANT and the
TENANT
does hereby accept in lease from INSULAR the said land and building,
for
a period of TEN (10) YEARS from the date provided for in Clause IX
hereof,
renewable at the option of the TENANT for an additional period of TEN
(10)
YEARS; PROVIDED, HOWEVER, that the exercise of the options to renew the
lease as herein stated shall be made by the TENANT in writing to
INSULAR
at least NINETY (90) DAYS before the expiration of the periods herein
mentioned.
All renewals shall be under the same terms and conditions hereinstated.cralaw:red
xxx
III
INSULAR expressly covenants
that if on or before the expiration of the period of TWENTY (20) YEARS
(covered by the original TEN (10) years period of the lease and the
renewal
period of TEN (10) years hereinabove stipulated) TENANT still desires
to
occupy the building, INSULAR shall give the TENANT first priority to
lease
the building at the monthly rental and under such other terms and
conditions
as may be agreed upon by the parties at that time.[25]
(Emphasis supplied)
The first renewal of
the lease contract was made on January 20, 1978 for a period of another
10 years, from December 1, 1977 until November 30, 1987, which by that
time had added up to twenty years of lease. The parties agreed that the
lease was renewable at the option of the Sun Brothers for an additional
period of five years with the proviso that the exercise of the option
to
renew the lease shall be made by the tenant in writing to Insular at
least
ninety days before the expiration of the period provided.[26]
The contract further provided that:
2) For the use and occupancy
of the leased premises TENANT shall, during the first (5) years of the
above 10-year period, pay in advance at the office of INSULAR, within
the
first five (5) days of every month a monthly rental of P24,325.00
exclusive
of real estate taxes and insurance premiums. (All real estate taxes,
other
assessments and insurance premiums of the leased properties shall be
for
the account of the TENANT).cralaw:red
Thereafter, the rental
shall be adjusted beginning on the sixth year of this lease with an
effective
increase equivalent to 6.5% per annum of the imputed value increment on
the land compounded at 5% annually for a period of five (5) years using
the current value of the leased property as base, which current value
is
hereby agreed upon by the parties as follows:
Land
----------------------------
P 3,793,500.00
Improvements
----------------
697,100.00
Total Current Value
----------
---------------------------------------------------------
P 4,490,600.00chanrobles virtuallaw libraryred
On the basis of the
above
current value, the monthly rental for the 2nd Five (5) years of the
said
10-year period is estimated to be P30,002.00 exclusive of real estate
taxes,
other assessments and insurance premiums for the leased properties.chanrobles virtuallaw libraryred
3) Except for the foregoing
modification/amendment, all the other terms and conditions of the
Contract
of Lease dated 29 January 1958 remain in full force and effect.[27]
(Emphasis supplied)
Thereafter, prior to
the expiration of the foregoing contract in November 1987, an exchange
of letters ensued between the contracting parties, as follows:
1. SUN BROTHERS, in
a letter dated July 15, 1987, expressed its intention to renew the
lease
for a period of five years.[28]
2. On July 31, 1987,
INSULAR informed SUN BROTHERS that it was agreeable to the renewal of
the
lease subject to the following terms: (a) lease period from 01 December
1987 to 30 November 1992; (b) basic monthly rental of P60,000.00; (c)
annual
escalation rate of 10%; and, (d) insurance premiums, realty taxes,
other
government assessments if any, shall be for the account of SUN BROTHERS.[29]
3. SUN BROTHERS acceded
to the terms of INSULAR[30]
but subsequently found the said terms to be "quite heavy", hence in a
letter
dated October 5, 1987, it offered the following "compromise" term: (a)
basic monthly rental increase of 50% over the present monthly rental of
P30,000.00, thereby making the new monthly rental to P45,000.00; and,
(b)
annual escalation rate of 5% which is a new condition not in the old
contract,
in addition to the insurance premiums, realty taxes, other government
assessments
if any, which shall be for the account of SUN BROTHERS.[31]
4. On November 20, 1987
INSULAR informed SUN BROTHERS that it was not amenable to the foregoing
"compromise" terms. It reasoned that the new basic rental rate of
P60,000.00
is fair and reasonable considering the present market value rates of
other
properties in the immediate vicinity.[32]
5. On November 27, 1987,
SUN BROTHERS requested reconsideration and accept its new offer of
P50,000.00
monthly rental and yearly increase of 5%.[33]
6. On December 10, 1987,
INSULAR informed SUN BROTHERS that it was agreeable to renewal of the
lease
subject to the following terms: (a) lease period from 01 December 1987
to 30 November 1992; (b) basic monthly rental of P50,000.00; (c) annual
escalation rate of 10%; and, (d) insurance premiums, realty taxes,
other
government assessments if any, shall be for the account of SUN BROTHERS.[34]chanrobles virtuallaw libraryred
The foregoing exchange
of communications ultimately led to the Contract of Lease dated
September
20, 1988, which is the second renewed Contract of Lease or third
contract
of lease between the parties. The contract again stipulated that the
lease
was renewable at the option of the tenant for an additional five years
provided the exercise of the option to renew the lease shall be made by
the tenant in writing to Insular at least ninety days before the
expiration
of the period. The lease was for a period of five years, from December
1, 1987 until November 30, 1992, with a monthly rental of P50,000.00
for
the first year, and an increase of 10% per annum for the succeeding
years,
exclusive of real estate taxes and insurance premiums which are for the
account of Sun Brothers.[35]
Again, the contract provided that "except for the foregoing
modification/amendment,
all the other terms and conditions of the Contract of Lease dated 29
January
1958 remain in full force and effect."[36]
Prior to the expiration
of the second renewal Contract of Lease in 1992, an exchange of letters
once more transpired between the parties, thus:
1. On May 22, 1992,
SUN BROTHERS communicated to INSULAR its intention to renew the lease
contract,
quoting P100,000.00 as monthly rental.[37]
2. In response thereto
in a letter dated June 10, 1992, INSULAR offered a lease period of one
year at a monthly rental of P500,000.00.[38]
3. More than a month
later, SUN BROTHERS, in a letter dated August 5, 1992, expressed that,
under the provisions of the contract of lease, SUN BROTHERS has the
right
to renew the lease for another period of five (5) years without any
condition
for the exercise of the option, except the giving of written notice at
least ninety (90) days before November 30, 1992 and that the rental due
INSULAR is the current rental. Thus, SUN BROTHERS insisted that
INSULAR’s
consent is not necessary to the renewal of the lease and the monthly
rental
due is the current rental paid by it.[39]
4. On September 1, 1992,
INSULAR replied to the foregoing letter, explaining that the contract
of
lease granted SUN BROTHERS only the option to renew the lease contract
and not the right to dictate the terms and conditions of the renewed
contract,
especially on the amount of rentals to be paid.[40]
5. On September 5, 1992,
SUN BROTHERS reiterated its position that it has the validly exercised
the option to renew the lease contract under the same terms and
conditions
by giving notice to INSULAR as provided in the lease contract.[41]
which apparently brought
about an impasse by reason of which Sun Brothers filed the petition for
declaratory relief with the RTC.chanrobles virtuallaw libraryred
Clearly, in this case,
the original contract of lease dictates the interpretation of the
renewal
clause. Under the original contract of lease, the "option to renew"
clause
means simply that after the 20-year period of lease, or after the
second
contract of lease which was to expire November 30, 1987, the lessee,
Sun
Brothers, is given "first priority to lease the building at the monthly
rental and under such other terms and conditions as may be agreed upon
by the parties at that time." The renewal contracts of 1978 and 1987
each
contained the stipulation that except for the modification or amendment
relating to the monthly rental and term of the lease, "all the other
terms
and conditions of the Contract of Lease dated 29 January 1958 remain in
full force and effect,"[42]
and, therefore, in pursuance thereof, the monthly rentals and other
terms
and conditions of the proposed renewal contract were agreed upon by the
parties in said 1978 and 1987 renewed contracts of lease.cralaw:red
Consequently, Sun Brothers’
interpretation based solely on the renewal clause under scrutiny
completely
ignoring the original contract of lease, is not plausible. The
contracting
parties’ intent as can be gleaned from the original contract of lease
and
confirmed by their subsequent acts in the 1977 and 1987 renewal
contracts,
was to constitute the renewal of the lease subject to terms and
conditions
to be agreed upon by the parties at the time of each renewal.cralaw:red
Furthermore, the subsequent
acts of the parties, evidenced by the exchange of letters between the
two
contenders, clearly show that their understanding and interpretation of
the "option to renew" clause is that which is explicitly provided in
the
original contract of lease. Thus, after Sun Brothers signified its
intention
to renew the lease in 1977 and in 1987, a series of offers and
counter-offers
on the monthly rental and the term of lease followed until the parties
reached an agreement thereon. Sun Brothers complied with the terms of
the
original contract of lease on the option to renew until 1992 when,
midway
through the negotiations, in the face of a P500,000.00 monthly rental
pegged
by Insular, Sun Brothers did a volte face and suddenly insisted that it
had a unilateral right to renew.cralaw:red
The cases of Ledesma
vs. Javellana, Millare vs. Hernando and Fernandez vs. Court of Appeals,
relied upon by the lower courts, find no application in the present
case
since the 1977 and 1987 renewal contracts explicitly adopted all the
other
provisions of the original contract of lease dated January 29, 1958,
including
the provision on contract renewals, except those that relate to the
monthly
rental and the term of the lease.cralaw:red
When the language of
the contract is explicit leaving no doubt as to the intention of the
drafters
thereof, the courts may not read into it any other intention that would
contradict its plain import.[43]
The Court would be rewriting the contract of lease between Insular and
Sun Brothers under the guise of construction were we to interpret the
"option
to renew" clause as Sun Brothers propounds it, despite the express
provision
in the original contract of lease and the contracting parties’
subsequent
acts. As the Court has held in Riviera Filipina, Inc. vs. Court of
Appeals,[44]
a court, even the Supreme Court, has no right to make new contracts for
the parties or ignore those already made by them, simply to avoid
seeming
hardships. Neither abstract justice nor the rule of liberal
construction
justifies the creation of a contract for the parties which they did not
make themselves or the imposition upon one party to a contract of an
obligation
not assumed."[45]
The Court will now discuss
the merit of Insular’s claim for monthly rental and damages.chanrobles virtuallaw libraryred
Insular pleads that
the Court should fix the monthly rental at P500,000.00. Sun Brothers
alleges
that the said amount is unreasonable, if not, unconscionable. However,
no evidence, other than its self-serving assertion, was offered by Sun
Brothers to substantiate its contention. On the other hand, Insular
submitted
in evidence the Appraisal Report which estimated the fair rental value
of the subject leased property at P700,000.00 as of October 30, 1991.[46]
The testimony of the appraiser, Executive Vice President, Engr. Oliver
Morales, of the Cuervo Appraisers, Inc.[47]
was not proven by Sun Brothers to be biased and partial on their
estimation
of the fair rental value of the subject leased property.cralaw:red
In addition, Insular
presented the Contract of Lease it entered into with Winsome
Development
Corporation dated March 30, 1993 involving an 8,200 square meter
property
which is almost twice the size of the subject leased property and
likewise
located in Makati, where the monthly rental for the first year,
starting
December 1992, was fixed at P600,000.00.[48]
Sun Brothers failed to demonstrate that this contract has been assailed
in court or that the agreed monthly rental was found to be
unconscionable.
Suffice it to state that courts may take judicial notice of the general
increase in rentals of lease contract renewals much more with business
establishments,[49]
especially in this case where the subject leased property covers a
4,215
square meter prime property centrally located in a well-developed
commercial
district of the City of Makati.[50]
Based thereon, the Court finds the amount of P500,000.00 as reasonable
monthly rental.cralaw:red
However, the Court cannot
validly impose said amount on Sun Brothers as monthly rental since it
was
not agreed upon by the parties. It is not the province of the Court to
make a contract for the parties or bind parties to one when no
consensual
agreement was entered into.[51]
But the amount of P500,000.00 a month since 1992 or P6 Million a year,
can be considered actual or compensatory damages representing
reasonable
rental value or unrealized monthly income for Sun Brothers’ continued
occupation
and enjoyment of the leased property. This is in consonance with
Producers
Bank of the Philippines vs. Court of Appeals[52]
wherein the Court had enunciated the kinds of actual damages, thus:
There are two kinds
of actual or compensatory damages: one is the loss of what a person
already
possesses, and the other is the failure to receive as a benefit that
which
would have pertained to him x x x. In the latter instance, the familiar
rule is that damages consisting of unrealized profits, frequently
referred
as "ganacias frustradas" or "lucrum cessans,’ are not to be granted on
the basis of mere speculation, conjecture, or surmise, but rather by
reference
to some reasonably definite standard such as market value, established
experience, or direct inference from known circumstances.[53]
In addition, records
disclose that in an Order dated April 30, 1993 the trial court
authorized
Sun Brothers to make a consignation of its monthly rentals of
P69,544.75
staring the month of December 1992 while the case pends in the trial
court.[54]
The amount of monthly rentals consigned[55]
should be deducted from the total amount of actual or compensatory
damages
herein granted to Insular. Furthermore, such actual or compensatory
damages
due shall earn interest at the legal rate of 12% per annum computed
from
the date of finality of this decision until full payment would have
actually
been made, in accordance with the ruling of this Court in Eastern
Shipping
Lines, Inc. vs. Court of Appeals,[56]
to wit:
I. When an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts,
delicts
or quasi-delicts is breached, the contravenor can be held liable for
damages.
The provisions under Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable damages.chanrobles virtuallaw libraryred
II. With regard particularly
to an award of interest in the concept of actual and compensatory
damages,
the rate of interest, as well as the accrual thereof, is imposed, as
follows:
1. When the obligation
is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall
itself
earn legal interest from the time it is judicially demanded. In the
absence
of stipulation, the rate of interest shall be 12% per annum to be
computed
from default, i.e., from judicial or extrajudicial demand under and
subject
to the provisions of Article 1169 of the Civil Code.cralaw:red
2. When an obligation,
not constituting a loan or forbearance of money, is breached, an
interest
on the amount of damages awarded may be imposed at the discretion of
the
court at the rate of 6% per annum. No interest, however, shall be
adjudged
on unliquidated claims or damages except when or until the demand can
be
established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art.
1169,
Civil Code) but when such certainty cannot be so reasonably established
at the time the demand is made, the interest shall begin to run only
from
the date the judgment of the court is made (at which time the
quantification
of damages may be deemed to have been reasonably ascertained). The
actual
base for the computation of legal interest shall, in any case, be on
the
amount finally adjudged.cralaw:red
3. When the judgment
of the court awarding a sum of money becomes final and executory, the
rate
of legal interest, whether the case falls under paragraph 1 or
paragraph
2, above, shall be 12% per annum from such finality until its
satisfaction,
this interim period being deemed to be by then an equivalent to a
forbearance
of credit. (Emphasis supplied)[57]
Moreover, the Court
takes exception from the CA’s opinion that the improvements introduced
by Sun Brothers should be considered in the latter’s favor in
considering
the terms of the rent. The fact that Sun Brothers had shouldered
maintenance
expenses on the building and paid real estate taxes as well as
insurance
premiums is inconsequential and immaterial in fixing the rent. The
improvements
introduced and the payment of expenses, taxes and premiums have always
been excluded in the determination of the monthly rental in the
contracts
of lease between the parties. The Court cannot disregard this fact
simply
because it later becomes disadvantageous to one party, especially when
Sun Brothers voluntarily assumed the obligation in the original
contract.cralaw:red
As to moral damages,
Insular’s prayer that moral damages not less than P5 Million be awarded
because its name and reputation has been defamed by Sun Brothers, is
not
tenable. The rule is that moral damages can not be granted in favor of
a corporation. Being an artificial person and having existence only in
legal contemplation, a corporation has no feelings, no emotions, no
senses;
it cannot, therefore, experience physical suffering, mental anguish,
fright,
serious anxiety, wounded feelings or moral shock or social humiliation,
which can be suffered only by one having a nervous system.[58]chanrobles virtuallaw libraryred
As to Insular’s plea
for exemplary damages, the Court finds the same meritorious. In
contracts
and quasi-contracts, the court may award exemplary damages if the
defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner.[59]
Sun Brothers was in evident bad faith when in the course of
negotiations
for the third renewal of the lease contract in 1992, it wantonly and
oppressively
insisted that it had a unilateral right to renew to lease thereby
resulting
in an impasse between the parties and which Sun Brothers took advantage
of and used as a basis for instituting the proceedings for declaratory
relief, although its prior actions since January 29, 1958 when the
original
contract of lease was executed, spanning more than three decades,
indicated
that it was well-aware of the contractual stipulation that after a
twenty-year
period of lease, the right to renew the lease was subject to such terms
and conditions that the parties may mutually agree upon at the time, as
expressly provided for in the original contract of lease. Consequently,
an award of exemplary damages in the amount of P500,000.00 is in order
by way of example and correction for the public good and also to serve
as a deterrent to the commission of similar misdeeds by others.cralaw:red
Under Article 2208 of
the Civil Code, attorney’s fees may be awarded not only when exemplary
damages is awarded but also when a party is compelled to litigate or to
incur expenses to protect its interest by reason of an unjustified act
of the other party.[60]
In the present case, Insular was constrained to engage the services of
counsel and to incur expenses of litigation in order to protect its
interest
to the subject property against Sun Brothers’ utterly unfounded
insistence
on an alleged unilateral right to renew the lease. The award of
P250,000.00
is reasonable in view of the time it has taken this case to be resolved.[61]chanrobles virtuallaw libraryred
WHEREFORE, the assailed
Decision, dated May 20, 1996, of the Court of Appeals in CA-G.R. CV No.
46987 is REVERSED and SET ASIDE. In lieu thereof, judgment is rendered
ordering respondent Sun Brothers and Company to pay petitioner Insular
Life Assurance Company, Ltd. actual damages in the amount of Five
Hundred
Thousand Pesos (P500,000.00) monthly, representing the unrealized
monthly
income of petitioner or P6 Million a year from December 1, 1992 until
respondent
vacates the leased premises. The amount of monthly rentals consigned
with
the trial court shall be deducted from the total amount of actual or
compensatory
damages due. Furthermore, such actual or compensatory damages due shall
earn interest at the legal rate of 12% per annum computed from the date
of finality of this decision until full payment thereof. In addition,
private
respondent Sun Brothers and Company is ordered to pay petitioner
exemplary
damages in the amount of Five Hundred Thousand Pesos (P500,000.00); and
attorney’s fees in the sum of Two Hundred Fifty Thousand Pesos
(P250,000.00).cralaw:red
Double costs against
private respondent.cralaw:red
SO ORDERED.cralaw:red
Puno, Quisumbing, Callejo,
Sr., and Tinga, JJ., concur.
____________________________
Endnotes:
[1]
Penned by Justice Antonio M. Martinez and concurred in by Justices
Ricardo
P. Galvez and Portia A. Hormachuelos.
[2]
Penned by Judge Erna Falloran Aliposa.chanrobles virtuallaw libraryred
[3]
Original Record, p. 1.chanrobles virtuallaw libraryred
[4]
Id., pp. 198-199.
[5]
Id., p. 1.chanrobles virtuallaw libraryred
[6]
Id., p. 15.
[7]
Id., pp. 16-17.
[8]
Rollo, pp. 63-64.
[9]
Id., p. 65.chanrobles virtuallaw libraryred
[10]
Original Record, p. 397.
[11]
Id., p. 445.chanrobles virtuallaw libraryred
[12]
Court of Appeals (CA), Rollo, p. 19.
[13]
Rollo, p. 108.chanrobles virtuallaw libraryred
[14]
121 SCRA 794 (1983).
[15]
151 SCRA 484 (151).
[16]
166 SCRA 577 (1988).
[17]
Rollo, pp. 113-114.
[18]
CA Rollo, p. 118.
[19]
Id., p. 159.
[20]
Rollo, pp. 22-23.chanrobles virtuallaw libraryred
[21]
Pestaño vs. Sumayang, 346 SCRA 870, 879 (2000); Bañas,
Jr.
vs. Court of Appeals, 325 SCRA 259, 271 (2000); Borromeo vs. Sun, 317
SCRA
176, 182 (1999); Lagrosa vs. Court of Appeals, 312 SCRA 298, 310
(1999);
Security Bank and Trust Company vs. Triumph Lumber and Construction
Corporation,
301 SCRA 537, 548 (1999).chanrobles virtuallaw libraryred
[22]
Langkaan Realty Development, Inc. vs. United Coconut Planters Bank, 347
SCRA 542, 549 (2000); Nokom vs. National Labor Relations Commission,
336
SCRA 97, 110 (2000); Commissioner of Internal Revenue vs. Embroidery
and
Garments Industries (Phil.), Inc., 305 SCRA 70, 74 (1999); Sta. Maria
vs.
Court of Appeals, 285 SCRA 351, 357 (1998).chanrobles virtuallaw libraryred
[23]
Limson vs. Court of Appeals, 357 SCRA 209, 216 (2001); China Banking
Corporation
vs. Court of Appeals, 265 SCRA 327, 338 (1996); Heirs of Severo
Legaspi,
Sr. vs. Vda. de Dayot, 188 SCRA 508, 514 (1990); Fernandez vs. Court of
Appeals, 166 SCRA 577, 587 (1988).
[24]
Original Record, p. 188.chanrobles virtuallaw libraryred
[25]
Id., pp. 188-189.
[26]
Id., p. 195.
[27]
Id., p. 196.
[28]
Id., p. 258.
[29]
Id., p. 259.
[30]
Ibid.
[31]
Id., p. 260.
[32]
Id., p. 261.
[33]
Id., p. 262.
[34]
Id., p. 263.chanrobles virtuallaw libraryred
[35]
Id., pp. 198-199.
[36]
Id., p. 199.
[37]
Id., p. 200.
[38]
Id., p. 265.
[39]
Id., p. 266.
[40]
Id., p. 168.
[41]
Id., p. 202chanrobles virtuallaw libraryred
[42]
Id., pp. 196, 199.chanrobles virtuallaw libraryred
[43]
German Marine Agencies, Inc. vs. National Labor Relations Commission,
350
SCRA 629, 641 (2001); Cruz vs. Court of Appeals, 293 SCRA 239, 252
(1998).
[44]
380 SCRA 245 (2002).chanrobles virtuallaw libraryred
[45]
Id., p. 263, citing Collins vs. Northwest Casualty Co., 180 Wash 347,
39
P2d 986, 97 ALR 1235.
[46]
Original Record, p. 287.chanrobles virtuallaw libraryred
[47]
TSN, October 6, 1992.
[48]
The contract of Winsome Development Corporation provided for the
following
monthly rental scheme:chanroblesvirtuallawlibrary
P600,000.00
– 01 Dec. 1992 to 30 Nov. 1993chanrobles virtuallaw libraryred
P660,000.00
– 01 Dec. 1993 to 30 Nov. 1997
P759,000.00
– 01 Dec. 1997 to 30 Nov. 1998
P853,875.00
– 01 Dec. 1998 to 30 Nov. 2000chanrobles virtuallaw libraryred
P939,263.00
– 01 Dec. 2000 to 30 Nov. 2002 (Original Record, p. 303).
[49]
Catungal vs. Hao, 355 SCRA 29, 41 (2001).chanrobles virtuallaw libraryred
[50]
The Municipality of Makati was converted into the City of Makati by
virtue
of Republic Act No. 7854, otherwise known as "The Charter of the City
of
Makati", which was approved on July 19, 1994.
[51]
Barrera vs. Lorenzo, 389 SCRA 329, 333 (2002); Pascual vs. Ramos, 384
SCRA
105, 115 (2002); LL and Company Development and Agro-Industrial
Corporation
vs. Huang Chao Chun, 378 SCRA 612, 622 (2002); Sabio vs. International
Corporate Book, Inc., 364 SCRA 385, 404 (2001); Ramnani vs. Court of
Appeals,
360 SCRA 645, 656 (2001); Chua vs. Court of Appeals, 301 SCRA 356, 364
(1999); Cuizon vs. Court of Appeals, 260 SCRA 645, 667 (1996).
[52]
365 SCRA 326 (2001).chanrobles virtuallaw libraryred
[53]
Id., p. 337, citing Talisay-Silay Milling Co., Inc. vs. Asociacion de
Agricultores
de Talisay-Silay, Inc., 247 SCRA 361, 381 (1995).
[54]
Original Record, p. 107.chanrobles virtuallaw libraryred
[55]
As of May 13, 1993, Sun Brothers has consigned P417,268.50 for monthly
rentals from December 1992 to May 1993, id., pp. 115-118.
[56]
234 SCRA 78 (1994).chanrobles virtuallaw libraryred
[57]
Id., pp. 95-97.chanrobles virtuallaw libraryred
[58]
National Power Corporation vs. Philipp Brothers Oceanic, Inc., 369 SCRA
629, 649 (2001); Hanil Development Co., Ltd. vs. Court of Appeals, 362
SCRA 1, 14 (2001); Acme Shoe, Rubber and Plastic Corp. vs. Court of
Appeals,
260 SCRA 714, 722 (1996); LBC Express, Inc. vs. Court of Appeals, 236
SCRA
602, 607 (1994).
[59]
Article 2232, Civil Code.chanrobles virtuallaw libraryred
[60]
ART. 2208. In the absence of stipulation, attorney’s fees and expenses
of litigation, other than judicial costs, cannot be recovered, except:chanroblesvirtuallawlibrary
(1)
When exemplary damages are awarded;chanrobles virtuallaw libraryred
(2)
When the defendant’s act or omission has compelled the plaintiff to
litigate
with third persons or to incur expenses to protect his interest;
(3)
In criminal cases of malicious prosecution against the plaintiff;chanrobles virtuallaw libraryred
(4)
In case of a clearly unfounded civil action or proceeding against the
plaintiff;chanrobles virtuallaw libraryred
(5)
Where the defendant acted in gross and evident bad faith in refusing to
satisfy the plaintiff’s plainly valid, just and demandable claim;
(6)
In actions for legal support;chanrobles virtuallaw libraryred
(7)
In actions for the recovery of wages of household helpers, laborers and
skilled workers;chanrobles virtuallaw libraryred
(8)
In actions for indemnity under workmen’s compensation and employer’s
liability
laws;chanrobles virtuallaw libraryred
(9)
In a separate civil action to recover civil liability arising from a
crime;chanrobles virtuallaw libraryred
(10)
When at least double judicial costs are awarded;chanrobles virtuallaw libraryred
(11)
In any other case where the court deems it just and equitable that
attorney’s
fees and expenses of litigation should be recovered.
In
all cases, the attorney’s fees and expenses of litigation must be
reasonable.chanrobles virtuallaw libraryred
[61]
United Coconut Planters Bank vs. Teofilo C. Ramos, G.R. No. 147800,
November
11, 2003, p. 20; Ching Sen Ben vs. Court of Appeals, 314 SCRA 762, 773
(1999). |