Ramon Magsaysay Award Foundation v. Court Of Appeals

TEEHANKEE, J.:

The case was argued and heard on the merits and submitted for resolution as per the Court's Resolution of November 24, 1982 issued after the hearing. Private respondent law firm of Salcedo, Del Rosario, Bito, Misa and Lozada (now Bito, Misa and Lozada) was the lessee of the whole 9th floor of petitioner's building with an area of 839.9 sq. m.

on Roxas Blvd., Manila under a written five-year lease contract commencing March 11, 1968 and expiring on March 10, 1973 with express provisos against any extension or renewal by implication of the lease and for the review of the rental rate at the end of the second year of the lease and every two years thereafter, as follows: "This Contract shall not be deemed extended or renewed by implication beyond the aforesaid period (5 years) for any cause or reason whatsoever, but only by negotiations on or before ninety (90) days prior to the expiration of this Contract. "3. The rent herein provided shall be subject to review at the end of the second year from the effective date of this Contract, and every two (2) years thereafter.

Adjustment shag be effected in the rental rate commensurate with increase(s) in operating expenses, including costs of labor, utilities, essential materials and insurance. "The rental rate may also be adjusted as necessary to take account of any change in the official dollar/peso exchange of the Central Ban k of the Philippines from the rate which was in effect on date of this Contract. "The adjusted rent, shag apply only to the two-year period following each review.

The stipulated rental rate included costs of electricity, water, maintenance contracts (elevator, security and janitors), building insurance, personnel (maintenance, building administration, cleaning supplies, etc.), all of which were borne and paid by petitioner-lessor. The original stipulated rental was P11,744.60 per month computed on the basis of P14.00 per square meter. On January 14, 1972, before the end of the fourth year of the lease, petitioner notified respondent that in accordance with the abovecited rental adjustment clause, it was increasing the monthly rental rate from P14.00 to P16.00 per square meter or a "On June 8, 1973, the private respondent returned the said draft to the petitioner requesting that it be finalized but with the last sentence of paragraph 2 thereof to read as follows: "The period from March 11, 1973 to June 10, 1973 shall be at the rate of P16.00 per sq.

m or P13,422.40 per month" (Exh. K).

On June 13, 1973, the petitioner sent back the final draft to the private respondent with the correction suggested by the latter, but with an added footnote reading: "Following the same rate of P16.00 per square meter or P13,422.20 per month which took effect March 11, 1972." (Exhs. L and L-1).

"On June 16, 1973, the private respondent returned to the petitioner said new lease contract already signed by private respondent, after its deletion of the footnote (Exh. M-1). The agreed monthly rental appearing on the said contract of lease was P14,261.30 at the rate of P17.00 per square meter effective June 11, 1973.

However, the monthly rental for the period of three months from March 11, 1973 to June 10, 1973 was P13,422.20, based on the P16.00 per square meter (Exh. M). "The private respondent began paying the new monthly rental based on P17.00 per square meter starting June 11, 1973 (Exhs.

16 to 16-A). It also gave the additional sum for the three months' deposit based on the new monthly rent (Exhs. 17,17-A and 17-B).

"On September 18, 1973, the petitioner wrote a letter to the private respondent inquiring as to what decision it has arrived at, after the arrival of Atty.

Bito, regarding the settlement of its arrearages, with the information that its occupancy of the premises on a month-to-month lease was against the policy of the petitioner's Board of Trustees (Exh. X). "On September 19, 1973, the private respondent replied with a disclaimer of the alleged unpaid back rentals, and a request for a copy of the lease contract as renewed duly signed by the Chairman of the petitioner's Board of Trustees (Annex N).

"On September 29, 1973, the petitioner replied by letter to the effect that, as it appeared that there was no meeting of the minds on the matter, it has no recourse but to refer the same to its counsel (Exh. O-1). "On April 6, 1974, the petitioner wrote a letter advising the private respondent that it found it necessary to increase the rate of P25.00 per square meter, effective April 1, 1974, in view of increased expenses of operation (Exh.

P). However, the private respondent continued its payment of the monthly rental at the rate of P17.00 per square meter. "On October 21, 1974, the petitioner's counsel wrote a letter to the private respondent stating that, if it was agreeable to pay the rental arrearages at the rate of P16.00 per square meter from March 11, 1972 to December 31, 1972, and to pay the rentals at P25.00 per square meter a month from April 1, 1974, less its remittances of P17.00 per square meter a month, the petitioner was willing to sign a new lease contract for a period of two years, effective April 1, 1974, subject to the new provisions which have been forwarded to the private respondent earlier (Exhs.

R and R-1). "On January 3, 1975, the petitioner again notified the private respondent that it was increasing the rental rate to P30.00 per square meter effective January 1, 1975 (Exh. S).

"On January 20, 1975, the petitioner's counsel sent a letter to the private respondent demanding that it vacate the premises not later than January 31, 1975, and that it pay the rental in arrears amounting to P110,212.21 (Exh. T). "On January 23, 1975, the private respondent wrote back stating that the petitioner has not given any factual or legal basis for its claim for back rents and that the private respondent had earlier given its position on the matter (Exh.

11). "On June 27, 1975, the petitioner filed a complaint for ejectment against the private respondent before the City Court of Manila (Civil Case No. 001074 CV), whose decision thereon, as earlier stated, was modified on appeal by the Court of First Instance of Manila (Civil Case No. 12076). The judgment of said court is now the subject of this petition for review.

"In resolving the issues raised by both parties, the Court a quo made the following factual findings and conclusions: (1) that a renewal of the contract of lease was perfected by the parties covering a period of two years, from March 11, 1973 to March 10, 1975, with the rate of rental fixed at P17.00 per square meter effective June 11, 1973; (2) that after the expiration of the said two-year period, there was an implied new lease under the provisions of Art. 1670 of the Civil Code; (3) that private respondent, as lessee, having occupied the premises for over one year, the court, under Art. 1687 of the Civil Code may fix a longer term for the lease, which it did by giving the private respondent a period of one year from the finality of the judgment before vacating and delivering possession thereof to the petitioner, as lessor; and (4) that the private respondent is not liable to pay the petitioner deficiency rentals in the amount of P16,276.11 corresponding to March 11, 1972 to December 3, 1972.

(Record, pp.

26-27) On appeal by petitioner, respondent appellate court affirmed the court a quo's judgment dismissing petitioner's complaint praying for reasonable compensation for the use of the leased premises beyond the contracted period and set aside only the fourth ruling of said court disallowing petitioner's claim of deficiency rentals for 1972 and instead ordered respondent "to pay said petitioner as deficiency rentals for the months of April May, June, July, August, September, October, November and December 1972, the sum of P16,236.00, with interest at the legal rate from the firing of the complaint." 1. The first issue is whether under the above-recited facts, there had been a meeting of the minds between the parties on the two-year renewal of their lease contract at the rate of P17.00 per square meter for the period from March 11, 1973 thru March 10, 1975.

On this point, the appellate court ruled against petitioner, holding as follows: "x x x It is noted that, even before the expiration on March 10, 1973, of the original 5-year term of the lease (Exh. A), the parties had been exchanging communications regarding its renewal These exchanges reached the point of agreement on the conditions therefor, to wit: '1. The period of this Contract shall be for two (2) year(s) beginning March 11, 1973 and terminating March 10, 1975, unless sooner terminated as elsewhere provided herein.

"This Contract shall not be deemed extended or renewed by implication beyond the aforesaid period for any cause or reason whatsoever, but only by negotiations on or before ninety (90) days prior to the expiration of this Contract '2. LESSEE shall pay LESSOR for the use and occupancy of the premises hereby a monthly rent of Pesos Fourteen Thousand Two Hundred Sixty-One & 30/100 (P14,261.30), Philippine Currency, during the term of this Contract effective June 11, 1973. This monthly rent is based on Pesos Seventeen (P17.00) per square meter.

The period from March 11, 1973 to June 10, 1973 shall be at the rate of P16.00 per square meter or P13,422.40 per month. (Exhibit M). The unilateral deletion of the footnote made by the private respondent (Exh.

L-1) from the final draft of the new lease contract cannot detract from the meeting of the minds reached by the parties insofar as its consideration and terms are concerned. We concur in the observation of the court a quo, that the parties' dispute over the increase of rental rate from P14.00 to P16.00 per square meter had no relevance to the perfection of the agreement to renew the lease. In fact, during the negotiations, although petitioner adverted to the arrearages in rental still due from the private respondent, it appears that said claim had been treated as a distinct or separate matter such that its resolution was not considered a condition precedent to the renewal under negotiation.

"That the parties had reached an agreement on the renewal of the lease contract finds support in the fact that it was even im plemented by the parties. Thus, with RMC Bill No. 2367 (Exh. 16-A), the petitioner started billing the private respondent at the rate of P17.00 per square meter starting June 11, 1973, and this was paid by the petitioner (Exh.

16). And, under RMC Bill No. 2370 (Exh. 17), the petitioner billed the private respondent the additional sum of P7,550.

1 0 for the three months' deposit due to increase in rental rate effective June 11, 1973, which amount was paid by the petitioner (Exit 17-A). (Record, pp. 28-28-A; emphasis copied) The Court finds this ruling that the parties had in fact agreed on the two-year renewal of the lease thru their exchanges of letters and implementing acts as above recited - notwithstanding that the draft renewal contract had not been signed by petitioner - to be in accordance with the facts and the law.

The only point of disagreement was with reference to the deficiency rental arrearages based on the previous adjusted rate of P16.00 per square meter but we find no reason to disturb the appellate court's observation that "during the negotiations, although petitioner adverted to the arrearages in rental still due from the private respondent, it appears that said claim had been treated as a distinct or separate matter such that its resolution was not considered a condition precedent to the renewal under negotiation." As already indicated hereinabove, the appellate court did in its decision overrule the court a quo and ordered the payment of the deficiency rentals claimed by petitioner for 1972 in the total sum of P16,236.00. 2.

But the appellate court erred in upholding the trial court's judgment that after the expiration of the two-year period of the renewed lease on March 10, 1975, there was an implied new lease under the provisions of Art. 1670 of the Civil Code at the same no longer adequate rental rate of P17.00 per square meter. The appellate court equally erred in not awarding the petitioner the reasonable compensation for respondent's detention of the leased premises after March 10, 1975, in accordance with the adjusted increased rentals charged by petitioner against all other tenants of its Ramon Magsaysay Award Foundation Building and duly accepted and paid by said tenants which amounted to P25.00 per square meter from April 1, 1974, P30.00 from January 1, 1975, P35.00 from July 1, 1975, P40.00 from July 1, 1976 and P42.50 from January 1, 1979. These adjusted rates were duly specified by petitioner in supplemental complaints and pleadings praying for their payment in the detainer case.

As stated in respondent's own memorandum of facts, "the last rental rate petitioner demanded from respondent to pay was P30.00/sq. m. effective January 1, 1975 and, since then, no demand for rental increases were made.

However, in its Supplemental Complaint filed in the City Court dated December 17, 1975, petitioner prayed that respondent be ordered to pay P35.00/sq. m. from July 1975, and in its Second Supplemental Complaint dated August 21, 1976, P40.00/sq.

m. from July 1976. (Record, p.

255) After respondent during the pendency of the detainer case in the appellate court vacated the detained premises on June 15, 1980, petitioner duly filed a manifestation and motion dated September 11, 1980 with the said court advising it of the return Of the possession of the premises which thereby rendered moot the issue of any authority on the part of the court a quo to recognize any implied lease or to fix a period of the lease for one year more (after its expiration on March 10, 1975) and pursued its claim to the reasonable compensation for use and occupation of the premises wrongfully detained by respondent as per adjusted billings sent by petitioner to all its building's occupants as of the date of the effectivity of the adjusted rentals, and submitted that as of June 16, 1980, respondent's liability to petitioner was in the total sum of P2,142,620.55 broken down as follows: "March 11, 1972 - December 31, 1972 April 1, 1974 - December 31, 1974 P25.00) (per sq.

m.) P39,182.32 January 1, 1975 - March 10, 1975 30.00)