cuenco vs talisay tourist sports complex

8/9/2019 Cuenco vs Talisay Tourist Sports Complex

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THIRD DIVISION

[G.R. No. 174154. October 17, 2008.]

JESUS CUENCO, petitioner, vs. TALISAY TOURIST SPORTSCOMPLEX, INCORPORATED AND MATIAS B. AZNAR III ,respondents.

D E C I S I O N

NACHURA,J p:

Before the Court is a petition for review oncertiorari under Rule 45 of the Rules ofCourt assailing the Decision dated April 18, 2005 and the Resolution dated August15, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 65773. TCaSAH

The Facts

The antecedent facts of the case are as follows:

On May 25, 1992, petitioner leased from respondents for a period of two (2) yearsfrom May 8, 1992 to May 8, 1994, the Talisay Tourist Sports Complex, to beoperated as a cockpit. The lease was extended for another four (4) years, or untiMay 8, 1998.

Under the Contract of Lease, 1 it was stipulated that petitioner shall, like a good

father of the family, maintain in good condition the furniture, chattels and all otherequipment and shall, at all times, keep the leased premises clean and sanitary. Forthis purpose, petitioner would allow the respondent's building supervisor or hisauthorized representative to make a regular spot inspection of the leased premisesto see to it that these stipulations are strictly implemented. 2Any damage caused tothe furniture, chattels, equipment and parts of the leased premises shall be theresponsibility of petitioner to repair and compensate. 3 Furthermore, petitionerwould give a deposit equivalent to six (6) months rental to answer for whateverdamages may be caused to the premises during the period of the lease. 4

Upon expiration of the contract, respondent company conducted a public bidding forthe lease of the property. Petitioner participated in the bidding. The lease waseventually awarded to another bidder, Mr. Rex Cuaqui Salud. 5 Thereafterpetitioner wrote four (4) demand letters to respondents. AIDTSE

The first letter, dated June 8, 1998, reads:

Dear Mr. Aznar:

I was so disheartened that after going through with the supposed publicbidding, haggling with the terms and conditions of a new lease agreement


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and after full compliance of ALL your requirements and the handshakessignifying the clinching of the deal, the contract was awarded to anotherparty. Though I believe I deserve a renewal, I had to accept your decisionwith a heavy heart.

It is now my desire to be released quickly from whatever liability orresponsibility under our previous contract. Repair works on some damagedportions were already done. Based on our contract, par. 5 thereof, it

is my understanding that I am answerable to all damages causedto furnitures(sic),chattels and other equipments and minor partsof the leased premises. Once cleared, I want the return of mydeposit of P500,000.00.

Kindly send your inspector to determine by actual ocularinspection if the restoration work is to your satisfaction.

Very truly yours,

JESUS C. CUENCO [signed] 6

Obviously, the letter was not answered, because on June 17, 1998 petitioner foundit necessary to write respondents a second letter reiterating his request for thereturn of the deposit. The second demand letter reads:

Dear Mr. Aznar:

It has been more than a week since my letter dated 8 June 1998 requestingthe return of my deposit of P500,000.00. I would assume yourrepresentative had already conducted an ocular inspection and you weresatisfied on the restoration works made on the premises. As I've stated in

my said letter, I want to be released as soon as possible. HIaSDc

I need to know immediately if I still have other things to complywith as pre-condition for the release of the deposit. As far as Iknow, I have already done my part.

Very truly yours,JESUS C. CUENCO [signed] 7

With still no response from respondents, petitioner, on August 14, 1998, sent a thirddemand letter which read:

Dear Mr. Aznar:

I am surprised by the unreasonable delay in the release of my deposit ofP500,000.00 in spite of my full compliance as to repair works on minordamage to the premises during my term as lessee. Twice I requested inwriting for the immediate release of my deposit but until now itremains unheeded. And the so-called "inventory" which your

lawyer Atty. Algoso8promised to give hasnot been given. Frankly,I am doubtful of the accuracy of said inventory, if any, considering


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the full blast major renovation now being conducted on thecomplex by the new concessionaire.I think it's about time we close thelast chapter of the book, in a manner of speaking, so we can proceed in ourseparate distinct ways. ECcDAH

I reiterate my request to please release right now my deposit ofP500,000.00.

Very truly yours,JESUS C. CUENCO [signed] 9

Finally, on August 18, 1998, petitioner, thru his counsel, wrote respondents a finademand letter as follows:

Dear Mr. Aznar:

For ignoring the two letters of my client Mr. Jesus C. Cuenco, dated June 8and 17, 1998 regarding his request for the return of his deposit in the sumof P500,000.00, he has decided to endorse the matter to this office for

appropriate action.IcHTED

It appears that when Mr. Cuenco leased the cockpit complex he wasrequired to put up a deposit to answer for damages that may be caused tofurnitures (sic), chattels and other equipments and minor repairs on theleased premises. When the lease expired and he failed to get arenewal, Mr. Cuenco in fulfillment of his obligation under thecontract caused the repair of minor damage to the premises afterwhich your attention was invited to get your reaction to therestoration work. And since he did not receive any objection, itcan be safely premised that the restoration was to the lessor's

satisfaction.

Mr. Cuenco informed me that the new concessionaire has undertaken a fullblast major renovation of the complex. Under this condition and in theabsence of an accurate inventory conducted in the presence of bothparties, it would be doubly difficult, if not impossible, to charge Mr. Cuencoof any violation of his undertaking especially as to deficiency in the furnitures(sic),chattels and other equipments in the premises. ITaESD

In view of all the foregoing, it is consequently demanded that you return toMr. Cuenco the aforesaid sum of P500,000.00 within THREE (3) DAYS fromnotice hereof; otherwise, he may be constrained to seek judicial relief for thereturn of the deposit plus interest, damages and attorney's fees.

Your compliance is enjoined.

Very truly yours, At my instance:

FEDERICO C. CABILAO (signed) JESUS C. CUENCO (signed)Counsel for Mr. Jesus C. Cuenco 10

As all of his demand letters remained unheeded, on October 21, 1998, petitioner


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filed a Complaint 11for sum of money, damages and attorney's fees. He maintainedthat respondents acted in bad faith in withholding the amount of the depositwithout any justifiable reason. 12

In their Answer, 13respondents countered that petitioner caused physical damage tosome portions of the leased premises and the cost of repair and replacement ofmaterials amounted to more than P500,000.00. 14 They also averred thatrespondent Matias B. Aznar III (Aznar) cannot be sued personally under the contract

of lease since a corporation has a separate and distinct personality from its officersand stockholders, and there was no allegation that Aznar, who is the President ofthe corporation, signed the contract in his personal capacity. 15

On March 8, 1999, the RTC issued a Pre-trial Order, 16 the pertinent portions ofwhich reads:

The following facts were admitted by the [respondents]:

1. There is no inventory of damages up to this time;

2. [Petitioner] deposited the amount of P500,000.00;

3. [Petitioner] sends(sic) several letters of demand to [respondents] butsaid letters were not answered. HcDATC

4. There was a renovation of the Talisay Tourist Sports Complex with aqualification that the renovation is only 10% of the whole amount.

The main issues in this case are as follows:

1. Whether or not [petitioner] is entitled to the return of the deposit of

P500,000.00, with interest;

2. Whether or not some portions of the complex sustained physicaldamage during the operation of the same by the [petitioner]. 17

On May 24, 1999, the RTC issued an Order 18admitting the exhibits of petitionerconsisting of the contract of lease dated May 4, 1994 and the four (4) demandletters. HaTSDA

On July 29, 1999, an Order 19was issued by the same court formally admitting the

respondents' following exhibits: the lease contract, inventory of the leased propertyas of June 4, 1998, inventory of the sports complex dated June 24, 1995, ocularinspection report dated January 15, 1998 and various receipts mostly in the name ofSouthwestern University incurred in different months of 1998.

On August 11, 1999, the RTC rendered a Decision 20 in favor of petitioner, thedispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of [petitioner] andagainst the [respondents], directing the latter jointly and severally to returnto [petitioner] the sum of P500,000.00, representing the deposit mentioned


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in the Complaint, plus 3% interest per month from August 18, 1998 until fullpayment thereof. ISTHED

The latter are, likewise, directed to pay [petitioner] the sum of P15,000.00 asand for litigation expenses.

With costs against the [respondents].

SO ORDERED. 21

The RTC ratiocinated that respondents' failure to reply to the letters of petitionerraises a presumption that petitioner has complied with his end of the contract. Thelower court gave credence to the testimony of respondents' witness, AtenisoCoronado (Coronado), the property custodian of the respondents, that the sportscomplex was repaired and renovated by the new lessee. The court also consideredthe admission of respondents' counsel during the pre-trial that no inventory of theproperty was conducted on the leased premises. The RTC debunked the inventorypresented by the respondents during trial as a mere afterthought to bolster theirclaim against petitioner. 22

Respondents appealed. On April 18, 2005, the CA rendered a Decision 23reversingand setting aside the decision of the RTC. Thefallo of the CA decision reads:

WHEREFORE, with the foregoing, the Decision of the Regional Trial Court,Branch 13, Cebu City, dated August 11, 1999, is REVERSED and SETASIDE, and a new one entered finding this case in favor of defendants-appellants Talisay Tourists Sports Complex and Matias Aznar III.

Consequently, Civil Case No. CEB-22847 for sum of money, damages, andattorney's fees involving herein parties, as well as all other claims andcounterclaims are hereby DISMISSEDfor lack of factual and legal basis. TEcAHI

No pronouncement as to costs.

SO ORDERED. 24

The CA ruled in favor of respondents on the basis of: (1) Coronado's testimony thatpetitioner continued to hold cockfights two months after the expiration of the leasecontract which was not refuted by petitioner; (2) the summary of repairs made on

the property showing that respondents spent the amount of P573,710.17immediately prior to the expiration of the lease contract and shortly thereafter; and(3) the new lessor incurred expenses amounting to over P3 million when heshouldered the rest of the repair and renovation of the subject property. 25

Hence, the instant petition.

The Issues

Petitioner raised the following issues for resolution of the Court: (1) whether ajudicial admission is conclusive and binding upon a party making the admission; and


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(2) whether such judicial admission was properly rejected by the CA. 26

On the other hand, respondents posed the following: (1) whether the findings of theCA that the cockpit sustained damage during the period of the lease was renderednot in accord with law or with the applicable decisions of the Court; (2) whether theCA committed an error of law in ruling that petitioner is not entitled for the returnof the deposit. 27

The ultimate question we must resolve is whether petitioner is entitled to thereturn of the amount deposited. TSADaI

The Ruling of the Court

We rule in the affirmative. Respondents failed to present sufficient proof to warrantthe retention of the full amount of the deposit given by petitioner.

The Supreme Court is not a trier of facts, and as a rule, does not weigh anew theevidence presented by the parties. However, the instant case is one of theexceptions to the rule because of the conflicting decisions of the RTC and the CAbased on contradictory factual findings. Thus, we have reviewed the records in orderto arrive at a judicious resolution of the case at bench.

Petitioner questions the CA's finding that there was damage caused the premiseswhile the lease was still in force. Such finding could only have been based onalleged inventory of the property conducted by the respondents. Petitioner takesexception to this evidence because of the earlier judicial admission made byrespondents' counsel that no inventory was conducted and, accordingly, anyevidence adduced by the respondents contrary to or inconsistent with the judiciaadmission should be rejected. AaCEDS

Indeed, at the pre-trial conference, respondents' counsel made an admission that noinventory was made on the leased premises, at least up to that time. This admissionwas confirmed in the Pre-Trial Order issued by the trial court on March 8, 1999 afterthe lease expired on May 8, 1998.

Yet, on July 1, 1999, respondents' witness Coronado testified, as follows:

ATTY. VASQUEZ:

Q Why do you know the defendants?

A Because Talisay Sports Complex is owned by Aznar Brothers RealtyCorporation of which I am employed as (sic) in charge of the realtydepartment. ESHAcI

Q How about Matias Aznar III, the defendant here?

A He is the Chairman of the Board.

Q Board of what?


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denied or disproved as against the person relying thereon. 32

Thus, respondents are bound by the admissions made by their counsel at the pretrial. Accordingly, the CA committed an error when it gave ample evidentiaryweight to respondents' evidence contradictory to the judicial admission. DEHcTI

The appellate court's findings that the damage in the premises exceeded theamount of the deposit is further sought to be justified, thus:

Verily, a perusal of the summary of repairs amounting to P573,710.17claimed to have been made by appellants over the property at about thattime immediately prior to the expiration of the lease contract and shortlythereafter, would show that the repairs pertained to repairs on the drainage,sewage, immediate premises and structure of the complex. We find thesame highly credible and meritorious considering that as earlier admitted byappellee, the repairs he made were minor and were confined only to certainportions of the complex, although substantial repairs were done on thecockhouses only, and that said repairs were done because of a coming bigtime derby and not to satisfy the provisions of the lease contract. Also, byimplication, appellee is stating that the new lessor incurred expensesamounting to over P3 million when he shouldered the rest of the repair andrenovation of the complex after the term of lease of appellee. 33

Yet, upon perusal of the receipts presented by respondents, we found that majorityof the receipts are under the name of Southwestern University. In theirMemorandum, 34 respondents aver that Southwestern University and respondentcorporation are sister companies. 35Even if true, this matter is of no consequencebecause respondent company and Southwestern University have distinct andseparate legal personalities, and Southwestern University is not a party to this case

Thus, we cannot just accept respondents' argument that the receipts paid in thename of Southwestern University should be credited to respondent company. In anyevent, they were not able to prove that those receipts were in fact used for therepair or maintenance of the respondents' complex. cECTaD

Furthermore, respondents are not entitled the full amount of the deposit becausethe repair and renovation of the sports complex after the expiration of petitioner'slease were undertaken not by respondents but by the new lessee. This can begleaned from Coronado's testimony on cross-examination,viz.:

Q You do not know. Mr. Witness, is it not a fact that the new lessee wasWacky Salud?

A Yes, sir.

Q And that was sometime of July or August of 1998?

A They were about to conduct three months repair of the complex?

Q So, Mr. Wacky Salud conducted, did you say repair or renovation? Is it


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renovation or repair? DAcaIE

A There was a renovation and repair.

Q Renovation including repair?

A Yes, sir.

COURT

Q In other words, after the expiration of the contract of Mr. Cuenco,Wacky Salud took over?

A Yes, he took over that repair and renovation were no longer includedin this presentation, that is at his own expense. DTIaCS

Q Precisely. In other words, some repairs were made by Mr. Salud andnot by Aznar Brothers Realty?

A Yes, sir. 36

Finally, the Court observes that the inventories presented by respondents were notcountersigned by petitioner or were they presented to the latter prior to the filing othe case in the RTC. Thus, we are more inclined to agree with the trial court thatthe "inventory was made as an afterthought", 37 in a vain attempt of therespondents to establish their case.

However, Coronado's testimony that petitioner extended the operation of the sportscomplex for a period of two months after the expiration of the lease without therespondents' authority and without the payment of rentals, remains unrebutted

Enlightening is the following testimony:SHADEC

Q I observed here in No. 16 of your summary, two months arrearsrentals, June to July, how come? The contract was supposed to expireMay 1998?

A Yes, because it had happened on this extension of the lease becausethey are still occupying until July after the expiration of the contract.

COURT

Q You mean to say that they still use the complex for the purpose forwhich it was intended, which is for cockfighting?

WITNESS

A Yes, they are still doing their usual operation.

ATTY. VASQUEZ

Q You mean to say that there were still cockfighting held in the complexeven after May 1998? EHScCA


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A Yes, sir. 38

This two (2) months over-stay of petitioner in the leased premises should becharged against the deposit. Because there was no renewal of the lease contract,it is understood that the continued use of the premises is on a monthly basis withthe rental in the amount previously agreed upon by the parties, in accordancewith Articles 1670 39and 1687 40of the Civil Code.

In the Contract of Lease of petitioner and respondent company, it was agreed thatthe rental to be paid shall be the following:

WHEREAS, the FIRST PARTY is the owner of the Talisay Tourist SportsComplex, Inc. located at Tabunok, Talisay, Cebu; cSHATC

WHEREAS, the SECOND PARTY has expressed his desire to lease saidcomplex (cockpit) and the FIRST PARTY have agreed to lease/let the same tothe SECOND PARTY subject to the following term and condition, to wit:

1. In consideration of this lease, the SECOND PARTY agrees to pay the

FIRST PARTY a lump sum of ONE MILLION PESOS (P1,000,000.00)representing advance rental for the first year, the same to be paid on May 8,1994. Thereafter, the rental shall be as follows:

Second year P1,050,000.00 or P87,500.00/month

Third year 1,100,000.00 or P91,666.67/month

Fourth year 1,175,000.00 or P97,916.67/month 41

Thus, by way of rental for the two-month overstay, the amount of P195,833.34

should be deducted from the amount of deposit paid by petitioner to respondentcompany. DEHcTI

As to petitioner's claim of interest of three percent (3%) per month on the amountdue him, the same is without legal basis. We note that no amount of interest waspreviously agreed upon by the parties in the contract of lease.

Under Article 2213 of the Civil Code, "interest cannot be recovered uponunliquidated claims or damages, except when the demand can be established withreasonable certainty". In the instant case, the claim of petitioner is unliquidated orcannot be established with reasonable certainty upon his filing of the case in the

RTC. This is because of the contending claims of the parties, specifically, the claim ofpetitioner for the return of the P500,000.00 deposit vis-a-vis the claim ofrespondents on the arrears in rentals and on the damage to the premises. It is onlynow that the amount that should be returned is ascertained,i.e.,P500,000.00 lessthe two-months arrears in rentals amounting to P195,833.34, the sum of which wilearn interest at the legal rate of six percent (6%) per annum 42from the time thecase was filed in the RTC on October 21, 1998. 43Upon finality of this decision, therate of interest shall be twelve percent (12%) per annum from such finality until fulsatisfaction. The foregoing interest rate is based on the guidelines set by the CourtinEastern Shipping Lines v. CA, viz.:


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I. When an obligation, regardless of its source,i.e.,law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be heldliable for damages. The provisions under Title XVIII on "Damages" of the CivilCode govern in determining the measure of recoverable damages. AaITCH

II. With regard particularly to an award of interest in the concept ofactual and compensatory damages, the rate of interest, as well as theaccrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of asum of money,i.e.,a loan or forbearance of money, the interest due shouldbe that which may have been stipulated in writing. Furthermore, the interestdue shall itself earn legal interest from the time it is judicially demanded. Inthe absence of stipulation, the rate of interest shall be 12% per annum to becomputed from default,i.e.,from judicial or extrajudicial demand under andsubject to the provisions of Article 1169 of the Civil Code.

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. Nointerest, however, shall be adjudged on unliquidated claims or damagesexcept when or until the demand can be established with reasonablecertainty. Accordingly, where the demand is established with reasonablecertainty, the interest shall begin to run from the time the claim is made

judicially or extrajudicially (Art. 1169, Civil Code) but when such certaintycannot be so reasonably established at the time the demand is made, theinterest shall begin to run only from the date of the judgment of the court ismade (at which time the quantification of damages may be deemed to havebeen reasonably ascertained). The actual base for the computation of legal

interest shall, in any case, be on the amount of finally adjudged.DaAIHC

3. When the judgment of the court awarding a sum of money becomesfinal and executory, the rate of legal interest, whether the case falls underparagraph 1 or paragraph 2, above, shall be 12% per annum from suchfinality until its satisfaction, this interim period being deemed to be by thenan equivalent to a forbearance of credit. 44

Concerning the solidary liability of respondents, we hold that respondent MatiasAznar III is not solidarily liable with respondent company. His function as thePresident of the company does not make him personally liable for the obligations of

the latter. A corporation, being a juridical entity, may act only through its directors,officers and employees. Obligations incurred by them while acting as corporateagents, are not their personal liability but the direct accountability of thecorporation they represent. 45

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appealsis hereby REVERSED AND SET ASIDE. The Decision of the RTC in Civil Case No. CEB-22847 is hereby REINSTATED with the following modifications:

(1) Talisay Sports Complex, Inc. is solely liable to return the amount of the


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deposit after deducting the amount of the two-months arrears in rentals; and AIHTEa

(2) The rate of legal interest to be paid is SIX PERCENT (6%) on the amount duecomputed from October 21, 1998, and TWELVE PERCENT (12%) interest, thereonupon finality of this decision until full payment thereof.

SO ORDERED.

Ynares-Santiago, Austria-Martinez, Azcuna *and Chico-Nazario, JJ.,concur.

Footnotes

1. Records, pp. 6-9. HcTDSA

2. Paragraph 4 of the Contract of Lease,id.at p. 7.

3. Paragraph 5 of the Contract of Lease,id.

4. Paragraph 11 of the Contract of Lease,id.

5. The new lessee's name appears in other parts of the records as Wakee/WackySalud.

6. Records, p. 10. (Emphasis supplied.)

7. Id.at 11. (Emphasis supplied.)

8. Atty. Algoso is the in-house counsel of the respondents.

9. Records, p. 12. (Emphasis supplied.)

10. Id.at 13-14. EIAHcC

11. Id.at 1-14.

12. Id.at 3.

13. Id.at 17-22.

14. Id.at 18.

15. Id.at 19.

16. Issued by Judge Meinrado P. Paredes;id.at 34.

17. Id.

18. Id.at 40.

19. Id.at 58.

20. Penned by Judge Meinrado P. Paredes;id.at 59-68. cEaCAH

21. Records, p. 68.


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22. Id.at 59-68.

23. Penned by Associate Justice Enrico A. Lanzanas, with Associate Justices ArsenioJ. Magpale and Sesinando E. Villon, concurring;rollo,pp. 36-42.

24. Id.at 41.

25. Id.at 39-41.

26. Id.at 286.

27. Id.at 264-265.

28. TSN, July 1, 1999, pp. 4-8. (Emphasis supplied.)

29. Exhibits "2", "2-B", "2-C" and "2-D".

30. Binarao v. Plus Builders, Inc.,G.R. No. 154430, June 16, 2006, 491 SCRA 49. CAaDSI

31. Ramos v. Dizon,G.R. No. 137247, August 7, 2006, 498 SCRA 17, 34.

32. Yujuico v. Atienza, Jr.,G.R. No. 164282, October 12, 2005, 472 SCRA 463.

33. Rollo,p. 40.

34. Id.at 258-278.

35. Id.at 272.

36. TSN, July 1, 1999, pp. 19-30.

37. Rollo,p. 90.

38. TSN, July 1, 1999, pp. 17-18.

39. Art. 1670. If at the end of the contract the lessee should continue enjoying thething leased for fifteen days with the acquiescence of the lessor, and unless anotice to the contrary by either party has previously been given, it is understoodthat there is an implied new lease, not for the period of the original contract, butfor the time established in Articles 1682 and 1687. The other terms of the origina

contract shall be revived.

40. Art. 1687. If the period for the lease has not been fixed, it is understood to befrom year to year, if the rent agreed upon is annual; from month to month, if it ismonthly; from week to week, if the rent is weekly; and from day to day, if the rentis to be paid daily. However, even though a monthly rent is paid, and no period forthe lease has been set, the courts may fix a longer term for the lease after thelessee has occupied the premises for over one year. If the rent is weekly, thecourts may likewise determine a longer period after the lessee has been inpossession for over six months. In case of daily rent, the courts may also fix alonger period after the lessee has stayed in the place for over one month. IaESCH


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41. Records, p. 6.

42. CIVIL CODE, Art. 2209.

If the obligation consists in the payment of a sum of money, and the debtor incursin delay, the indemnity for damages, there being no stipulation to the contrary,shall be the payment of the interest agreed upon, and in the absence ofstipulation, the legal interest, which is six per cent per annum.

43. CIVIL CODE. Art. 2212.

Interest due shall earn legal interest from the time it is judicially demanded, althoughthe obligation may be silent upon this point.

44. G.R. No. 97412, July 12, 1994, 234 SCRA 79.

45. Siemens Philippines, Inc. v. Enrico A. Domingo,G.R. No. 150488, July 28, 2008.

* Additional member replacing Associate Justice Ruben T. Reyes per Special OrderNo. 521 dated September 29, 2008. ACcDEa

cuenco vs talisay tourist sports complex

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