December 2004 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

G.R. No. 158526 - D.O. PLAZA MANAGEMENT CORP. v. CO-OWNERS HEIRS OF ANDRES ATEGA, ET AL.

SECOND DIVISION

[G.R. NO. 158526 : December 16, 2004]

D.O. PLAZA MANAGEMENT CORP., Petitioner, v. CO-OWNERS HEIRS OF ANDRES ATEGA, namely: BASILISA KITTILSTVEDT, VERONICA ATEGA-NABLE, HEIRS OF MARIA DEEN, HEIRS OF CONSOLACION ATEGA-TOLENTINO, HEIRS OF CANUTA ATEGA-MORTOLA, HEIRS OF PROSPERIDAD ATEGA-RODRIGUEZ, HEIRS OF MARIANO ATEGA, HEIRS OF PLENIO ATEGA, HEIRS OF KATHERINE ATEGA-MORAN, Respondents.

D E C I S I O N

PUNO, J.:

The instant petition stemmed from a complaint for unlawful detainer filed by respondent Heirs of Andres Atega before the Municipal Trial Court in Cities (MTCC) of Butuan City against petitioner D.O. Plaza Management Corporation (DOPMC).

In their complaint,¹ respondents alleged that they, as lessors, entered into a contract of lease with petitioner, as lessee, over two (2) adjoining parcels of land situated at Baan, Butuan City, one having an area of 1.70 hectares and the other with an area of 2,312 square meters. The Lease Contract² was for a term of five (5) years, commencing on December 16, 1986 up to December 15, 1991, renewable upon mutual agreement of the parties. It provided for a monthly rental of P3,000 for the first year, P3,500 for the second year, P4,000 for the third year, P4,500 for the fourth year, and P5,000 for the fifth year, with a proviso that "the LESSORS reserve the right to increase the rental proportionate to any increase in real estate taxes, assessments, levies or additional charges on the real property which may be imposed by national or local governments or proportionate to any further devaluation of the Philippine peso." The parties also agreed that "[i]mprovements made by the LESSEE shall, after the term of [the] contract, or in case of its termination, automatically accrue to the LESSORS as owners without need of any formal deed of conveyance in any form, save only those which can be removed by the LESSEE without impairing or causing damage to the land or improvements." As to the obligations of petitioner, as lessee, and the penalties for their violation, the parties stipulated as follows:

(5) Upon the expiration of the term of this Contract or for any reason if LESSEE shall be compelled to vacate the premises, LESSEE shall surrender possession of the leased premises to the LESSORS free from any substantial damages to the land and improvements thereon as well as from any occupants therein, it being understood and agreed that it shall be the obligation of the LESSEE to maintain the land and the improvements thereon as well as to prevent and eject unlawful occupants thereon during the term of this Contract up to the time that possession is surrendered to the LESSORS;

(6) LESSEE shall not allow any act which will prevent LESSORS from peaceful enjoyment and possession of the leased premises after the expiration of the term of this Contract; failure on the part of the LESSEE to comply with this obligation shall entitle the LESSORS to damages;

(7) LESSEE shall not sublease the premises or any portion thereof or assign its rights under this Contract without the prior written consent of the LESSORS;

(8) In case LESSORS are compelled to eject any occupant in the premises after the expiration of this Contract and such occupant occupies the premises during the term of this Contract or by reason of any act attributable to the LESSEE, the costs of such ejectment and damages shall be for the account of the LESSEE; x x x

(11) LESSORS shall have the right to terminate this Contract due to violation of any term and condition herein upon serving a written notice to that effect; in no case shall LESSORS be obliged to return to LESSEE any amount of rental paid in advance by the latter if the LESSORS shall exercise its (sic) right to terminate this Contract by reason of this paragraph.

Should LESSEE serve a written notice to the LESSORS terminating this Contract, the unpaid rental corresponding to the unexpired period shall be paid by the LESSEE to the LESSORS; thereafter, LESSEE shall first comply with its obligation to remove any occupant from the premises and surrender possession to the LESSORS; x x x

After the expiration of the contract, petitioner allegedly proposed to extend the lease. In a letter dated March 11, 1992,³ respondents agreed to reduce the area leased from 19,213 sq. m. to 9,205 sq. m. but increased the rent to P3.50 per square meter or P32,217.50 per month. They gave petitioner seven days within which to reply, in vain. Still, respondents continued to exchange communications with petitioner.⁴ In April 1994, petitioner's representative allegedly met with respondents' counsel, during which, the former offered to pay at a rental rate of P10,000.00 per month. This offer was rejected by respondents' counsel. Respondents sent their last letter to petitioner on June 7, 1994,⁵ reiterating their demand for it to pay unpaid rentals amounting to P934,307.50⁶ and to vacate the leased premises, together with the occupants therein, within ten (10) days. Petitioner refused to heed their demands.

In its answer with counterclaim,⁷ petitioner admitted the contents of the Lease Contract but denied proposing to, or receiving a proposal from, the respondents to extend the lease. It contended that the leased lots it occupied were "within [the] 30-meter river bank protection which bank protection cannot be owned by any person, it belong[ing] to the government of the Republic of the Philippines." It assailed the jurisdiction of the MTCC over the subject matter of the case. It contended that "[w]hatever cause of action the complaint states, the same has been barred by the statute of limitations, waived, abandoned or otherwise extinguished." Petitioner also alleged that the "astronomical sum" of P32,217.50 is not a valid demand. It appended the affidavit of Ireneo G. Boca, a geodetic engineer, and the subdivision plan he prepared, to prove that the actual area occupied by petitioner was only 4,302 sq. m.⁸ It also attached the affidavit of its employee, Hidulfo A. Maghuyop,⁹ who attested that the leased land: (a) is "barren" except for the buildings constructed by petitioner; (b) "adjoins a river bank" and "can easily be inundated by knee-deep flood when there is a (sic) rain;" and (c) is "far from [the] commercial centers of Butuan City."

On January 13, 1995, the MTCC of Butuan City, Branch 2, rendered a decision in favor of respondents. The dispositive portion of the decision states:

Viewed from the foregoing findings, the Honorable Court hereby renders judgment in favor of the plaintiffs and as against defendant corporation, ordering the latter and all persons or occupants who claim rights or interest from the defendant:

1. to vacate and relinquish the possession of the land and ownership of the buildings leased to them;

2. to pay the rentals at Thirty[-]two Thousand Two Hundred Seventeen Pesos and 50/100 (P32,217.50) per month from December 16, 1991 until defendant corporation shall have vacated and relinquished possession and ownership of the land and buildings;

3. to pay the sum of Twenty Thousand (P20,000.00) Pesos as attorneys' fees;

4. to pay the sum of Five Thousand (P5,000.00) Pesos as litigation expenses; andcralawlibrary

5. to pay the cost of this suit.

SO ORDERED.¹⁰

In allowing the increased monthly rental of P32,217.50, the MTCC considered the fact that under the lease contract, respondents, as lessors, have become the owners of the improvements introduced to the leased lots upon the termination of the lease contract. It took note of the improvements in the lots consisting of, among others, a building used by petitioner as its office and another building used as residence by Governor Democrito O. Plaza's family. It held that "[b]eing the co-owners not only of the land but also of the improvements therein, it is [respondents'] veritable right to demand the increase of the use of the land and buildings from the [petitioner] corporation."¹¹

On appeal, the Regional Trial Court (RTC) of Butuan City, Branch 2, affirmed the decision of the MTCC, with modifications, viz:

WHEREFORE, the appealed decision is hereby affirmed with certain modifications, to wit:

a) directing and ordering defendant-appellant to vacate the premises of the 2 lots subject matter of this case and to deliver the possession thereof in (sic) the plaintiffs-appellees, including all the improvements introduced by the defendant-appellant thereon like the buildings which improvements are now owned by the appellees pursuant to and by the operation of the terms and conditions of paragraph (3) of the written contract that expired on December 15, 1991;

b) directing and ordering defendant-appellant to pay plaintiffs-appellees the amount of Fourteen Thousand Pesos (P14,000.00) as monthly rental starting from December 16, 1991 until defendant-appellant shall have vacated the leased premises, crediting in favor of the defendant-appellant the amounts received by the plaintiffs-appellees as rental through the sheriff, which amounts are the amounts deposited with the court and the proceeds of the writ of execution pending appeal;

c) directing and ordering defendant-appellant to pay plaintiffs-appellees the amount of Seven Thousand Pesos (P7,000.00) as attorney's fees and Three Thousand Pesos (P3,000.00) as expenses of litigation; andcralawlibrary

d) with costs against the defendant-appellant.

SO ORDERED.¹²

The RTC found the amount of P32,217.50 as "exorbitant and unreasonable." It gave credence to the affidavit of Maghuyop that the leased land is remote. The RTC noted that the leased land is classified as residential with a market value of P745,210.00, as shown by Tax Declaration No. GR-11-002-0427-R.¹³ It pointed out that if the lessee were to pay monthly rental of P32,217.50, the lessors would recover the acquisition cost of the land in less than two (2) years. It held that this is contrary to "business practices and experience" where "recovery of investment or acquisition cost of lands and buildings will take on the average a period of ten (10) years." Hence, it reduced the monthly rent to P14,000.00.¹⁴

Respondents moved for a partial reconsideration of the decision of the RTC insofar as it reduced the monthly rental from P32,217.50 to P14,000.00 and the attorney's fees from P20,000.00 to P7,000.00.¹⁵ It attached the tax declarations¹⁶ of some eighteen (18) occupants of the leased land to show the fair market value of the improvements and their industrial or commercial use. Respondents also prayed for the issuance of an alias writ of execution¹⁷ based on the decision of the RTC, without prejudice to the outcome of their motion for partial reconsideration.¹⁸ The RTC denied respondents' partial motion for reconsideration¹⁹ but granted the motion for the issuance of an alias writ of execution.

Thereafter, respondents filed a Petition for Review with the Court of Appeals (CA). They sought the reinstatement of the decision of the MTCC, ordering the payment of P32,217.50 as monthly rental, P20,000.00 as attorney's fees, and P5,000.00 as litigation expenses. They likewise prayed that the decision of the RTC be modified to require payment of monthly rentals from December 16, 1991 until petitioner and the occupants in the leased premises shall have vacated the premises.²⁰

On May 21, 2003, the CA modified the ruling of the RTC. The dispositive portion of its decision states:

WHEREFORE, the petition is GRANTED. The June 8, 1998 Decision of the RTC is MODIFIED, as follows:

a) Respondent and all persons and entities whom it authorized to occupy the subject premises and improvements are hereby directed and ordered to vacate the same and deliver possession thereof to petitioners;

b) Respondent is directed and ordered to pay petitioners the amount of Thirty[-]two Thousand Two Hundred Seventeen pesos and 50/100 (P32,217.50) per month as reasonable rent starting from December 16, 1991 until respondent and all persons and entities whom it authorized to occupy the premises and improvements shall have vacated the same;

c) Respondent is ordered to pay the amount of Twenty Thousand Pesos (P20,000.00) as attorney's fees and Three Thousand Pesos (P3,000.00) as expenses of litigation; andcralawlibrary

d) Respondent is ordered to pay the costs.

SO ORDERED.²¹

Hence, this petition.

Petitioner contends that it should only be held liable at a monthly rental rate of P14,000.00. It raises the issue of whether the reasonable monthly rental value of the leased premises is P32,217.50, as found by the CA and the MTCC, or P14,000.00, as found by the RTC.²²

Respondents, on the other hand, contend that the instant petition must be dismissed as: (a) petitioner violated Rule 45, Section 2 of the Rules of Court on the payment of docket and other lawful fees and deposit; (b) petitioner's counsel failed to indicate his Roll of Attorneys Number, in violation of Supreme Court Circulars; (c) petition does not pose a question of law, in violation of Section 1, Rule 45 of the Rules of Court; and (d) assuming that the petition raises a question of law, the CA did not err in ruling in their favor.²³

We shall first resolve the procedural issues.

First, respondents contend that the instant petition must be dismissed outright for violating Rule 45, Section 2 of the Rules of Court. They contend that "[n]owhere in the motion for extension served on [r]espondent[s] was any proof submitted that the corresponding docket and lawful fees and deposit were paid."

This contention has no merit. Rule 45 of the Rules of Court provides:

Sec. 2. Time for filing; extension. - The petition shall be filed within fifteen (15) days from notice of the judgment or final order or resolution appealed from, or of the denial of the petitioner's motion for new trial or reconsideration filed in due time after notice of the judgment. On motion duly filed and served, with full payment of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Supreme Court may for justifiable reasons grant an extension of thirty (30) days only within which to file the petition.

The records reveal that petitioner received the assailed decision of the CA on June 9, 2003. It filed its Ex Parte Motion for Extension of Time to File Petition for Review on Certiorari with this Court on June 23, 2003. The rollo of this case shows that the Docket-Receiving Section, Docket Division of the Judicial Records Office of this Court received payment of docket and other lawful fees and deposit from petitioner, through its counsel Atty. E.U. Guyot, on the same day that the motion was filed. This is sufficient compliance with the law. Nowhere in the cited provision is it required that proof of payment be attached to the Motion for Extension served on the opposing party.

Second, respondents contend that the instant petition must be considered "as an unsigned pleading and treated as not having been filed" for the failure of petitioner's counsel to indicate his Roll of Attorneys Number.

This argument is unavailing. In this Court's En Banc Resolution dated April 1, 2003, we clarified that our Resolution dated November 12, 2002 in Bar Matter No. 1132,²⁴ granting the request of the Board of Governors of the Integrated Bar of the Philippines and the Sangguniang Panlalawigan of Ilocos Norte to require all lawyers to indicate their Roll of Attorneys Number in all papers and pleadings filed in judicial or quasi-judicial bodies, has the following effect, viz:

All pleadings, motions and papers filed in court, whether personally or by mail, which do not bear counsel's Roll of Attorneys Number as herein required may not be acted upon by the court, without prejudice to whatever disciplinary action the court may take against the erring counsel who shall likewise be required to comply with the requirement within five (5) days from notice. Failure to comply with such requirement shall be a ground for further disciplinary sanction and for contempt of court.

We imposed such requirement "to protect the public by making it easier to detect impostors who represent themselves as members of the Bar" and "to help lawyers keep track of their Roll of Attorneys Number." It was not meant to be a ground to dismiss an action, expunge from the records or refuse inclusion from the records of any pleading in which such Roll of Attorneys Number is lacking. Aside from the disciplinary sanctions that may be imposed against the erring counsel, failure of counsel to indicate his Roll of Attorneys Number is a ground for the court not to act on the pleading, motion, or paper filed in court, until such information is supplied. In the case at bar, petitioner's counsel through an Ex Parte Manifestation dated August 14, 2003, informed the Court of his Roll of Attorneys Number, copy furnished counsel for respondents.²⁵ We noted this manifestation in our Resolution dated September 1, 2003.²⁶

Third, respondents contend that the instant petition does not pose a question of law but a factual finding of the CA which should not be reviewed by this Court.

Again, we reject respondents' stance. It is a well-settled rule that in general, the findings of fact of the CA are final and conclusive and cannot be reviewed on appeal to this Court. However, we have allowed review under exceptional cases, such as, in the case at bar, where the findings of the CA conflict with that of the trial court.²⁷

We now come to the main issue: whether the reasonable monthly rental value is P32,217.50, as found by the CA and the MTCC, or P14,000.00, as found by the RTC.

Petitioner contends that the monthly rental of P32,217.50 is "unconscionable," "clearly unjust and unfair" and "clearly against the law, justice, equity and the spirit of the law."²⁸ It contends that the decision of the MTCC is "inferior"²⁹ to that of the RTC, pointing out that the RTC considered the location, commercial viability and other factors in arriving at the monthly rental value of P14,000.00.³⁰ Petitioner also calls this Court's attention to its Respondent's Rejoinder to the Petitioners' Reply dated July 18, 2001 which was not considered by the CA.

Petitioner's contentions fail to sway us.

We have defined fair rental value as the reasonable compensation for the use and occupation of the leased property.³¹ There is no hard and fast rule in determining the reasonableness of the rental charged. In Manila Bay Club Corporation v. CA,³² we considered: (a) the prevailing rates in the vicinity; (b) location of the property; (c) use of the property; (d) inflation rate; and (e) the testimony of one of the private respondents. In Umali v. The City of Naga,³³ we added a catch-all phrase that "other minor factors" should be taken into consideration.

In the case at bar, the CA correctly considered the following factors in pegging the reasonable monthly rental at P32,217.50, viz:

First, the old rate did not reflect the fair value of the subject premises. It was kept artificially low as a concession to respondent which undertook to introduce improvements into the property, ownership of which would automatically accrue to petitioners at the end of the term of the lease.

Second, while the new lease shall cover a reduced area of 9,205 square meters only, a higher rate is still justified because the new lease will affect not only the land but also 35 units of buildings and houses, ownership of which, as provided in the lease contract, automatically accrued to them at the end of the term of the lease. These structures include buildings used for commercial and industrial purposes and residential houses. Based on the tax declarations covering the land and improvements, the total market value thereof is over six million pesos.

Third, the new rate is equivalent to PhP3.50 per square meter. This is the prevailing rental rate in the nearby Municipality of Cabadbaran. On the other hand, the subject premises are located in Butuan City where rental rates are definitely higher. The rate in Cabadbaran is being applied to the subject premises only as a concession to respondent.

Finally, inflation has diminished the value of rental payments on the subject premises. It would appear that respondent, through its predecessor-in-interest, first leased the premises in 1973 at only Php0.03 per square meter. The lease was renewed many times over but always at concession rates on account of the close ties between the parties.³⁴ (citations omitted) chanroblesvirtuallawlibrary

The CA rightly adopted the decision of the MTCC after finding no sufficient reason for the RTC to reduce the monthly rental from P32,217.50 to P14,000.00.

First, the RTC erroneously based its conclusion on the value of the land occupied by the petitioner, without taking into account the improvements which accrued to the respondents upon the expiration of the lease contract, such as: a) an administration building for commercial use with a floor area of 767.20 sq. m.; b) an office building for commercial use with a floor area of 222 sq. m.; c) a bodega and garage for commercial use; d) a poultry house for commercial use; e) another building for commercial use with a floor area of 114 square meters; and f) several residential units.³⁵

Second, the RTC's judicial cognizance of a supposed practice in the business of renting property that the acquisition cost of the property is to be recovered in ten years, is also unconvincing. Matters of judicial notice have three material requisites: (1) the matter must be one of common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it must be known to be within the limits of jurisdiction of the court. The power of taking judicial notice is to be exercised by courts with caution. Care must be taken that the requisite notoriety exists and every reasonable doubt on the subject should be promptly resolved in the negative.³⁶ In questioning the alleged practice judicially taken cognizance by the RTC, the CA correctly observed as follows:

x x x Only the forces of supply and demand can shape the property market. If there is much demand for a piece of property, there is nothing to stop the owner from recovering its acquisition cost and make a profit all in one day. The business practice invoked by the RTC by judicial notice is too uncommon and dubious to be the basis for its computation of the reasonable rent.³⁷

Third, even if there was such a practice, the RTC's computation would still be erroneous. As the CA demonstrated:

x x x [I]f the reasonable rent is to be derived by spreading the acquisition cost of the properties over a period of ten years beginning 1996, then the amount would be approximately PhP49,761.00, not just PhP32,217.50. This is because the total market value of the land and improvements is PhP6,290,700.00 based on the 1996 tax declarations covering the properties.³⁸

Fourth, the reliance on Maghuyop's affidavit is also unconvincing. The following pieces of evidence contradict Maghuyop's testimony that the leased premises are purely residential and remote, viz: (a) tax declarations marked as Annexes "A," "C," "D," "E," "G" and "H" to respondents' Partial Motion for Reconsideration filed with the RTC, stating that the key improvements on the premises were used by petitioner for commercial or industrial purposes; and (b) letter of petitioner, through Valentina G. Plaza, dated July 20, 1992, admitting that the leased premises are for the temporary use of its personnel, hence, may be considered commercial and/or industrial-related in use. We agree with the CA that the distance of the leased premises from the center of Butuan City does not detract from its commercial and/or industrial nature as the same serves the needs of its logging business which cannot be conducted at the center of the city.³⁹

Finally, petitioner's contention that the CA erred in not considering its Respondent's Rejoinder to the Petitioners' Reply is untenable. Petitioner itself admits that its rejoinder was submitted long after the case was submitted for decision with the CA.⁴⁰ It is noteworthy that a rejoinder is not a required pleading in a pending appeal with the CA.⁴¹ Moreover, a bare reading of petitioner's rejoinder before the CA shows that it is a mere rehash of its Comment, filed with the same court.

In sum, we find no reversible error in the findings of the CA and the MTCC allowing an increased monthly rental of P32,217.50. It is only when the increased rental is clearly exorbitant that the courts would interfere, as a matter of equity.⁴² Well-settled is the rule that the burden of proving that the increased rental is unconscionable, rests on the lessee.⁴³ In this case, the preponderance of evidence supports the reasonableness of respondents' demand. Petitioner, as lessee, failed to discharge its burden to prove otherwise.

IN VIEW WHEREOF, the instant petition is DISMISSED. The Decision of the Court of Appeals dated May 21, 2003 in CA-G.R. SP No. 48987 is AFFIRMED.

SO ORDERED.

Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.
Callejo, Sr., J., on leave.

Endnotes:

---

¹ Original Records, pp. 1-5.

² Annex "A" of the Complaint; Id. at 7-15.

³ Exhibit "A" of Memorandum/Position Paper for the Plaintiffs with the MTCC; Id. at 62-64.

⁴ Letters of communication between the parties dated July 20, 1992, June 23, 1993, September 27, 1993, October 6, 1993, January 5, 1994, January 25, 1994, and February 24, 1994, were attached by respondents as Annexes "B," "C," "D," "E," "F," "G" and "H," respectively, of their Memorandum/Position Paper with the MTCC; Id. at 67-77.

⁵ Annex "C" of the Complaint; Id. at 17-18.

⁶ Computed at the rental rate of P32,217.50 per month from December 16, 1991 up to the date of the demand letter.

⁷ O.R. pp. 21-24.

⁸ Annexes "A" and "B," respectively, of the Position Paper for Defendant with the MTCC; Id. at 45-46.

⁹ Annex "C" of its Position Paper with the MTCC; Id. at 47.

¹⁰ Rollo, p. 30.

¹¹ Id. at 20-29.

¹² Id. at 63-64.

¹³ Exhibit "K" of Respondents' Memorandum/Position Paper with the MTCC; Id. at 83.

¹⁴ Rollo, pp. 58-64.

¹⁵ O.R., pp. 539-543.

¹⁶ Annexes "G" to "M" and "O" to Y" of Respondents' Partial Motion for Reconsideration with the RTC; Id. at 545-568.

¹⁷ The RTC of Butuan City, Branch 2, previously issued an Order dated August 24, 1995, allowing the execution of the decision of the MTCC pending appeal. Petitioner filed a Petition for Certiorari with the CA questioning this Order. The CA dismissed the said petition in its Decision dated October 18, 1996, which was affirmed by this Court in our Resolution dated August 5, 1998.

¹⁸ O.R., p. 569.

¹⁹ Order dated September 3, 1998; Id. at 640.

²⁰ CA Rollo, p. 16.

²¹ Rollo, pp. 44-45.

²² Id. at 8-21.

²³ Id. at 87-91.

²⁴ Re: Resolution No. 112-2002 of the Sangguniang Panlalawigan of Ilocos Norte, Requesting to Require Lawyers to Indicate in their Pleadings their Number in the Roll of Attorneys.

²⁵ Rollo, pp. 94-95.

²⁶ Id. at 96.

²⁷ Larena v. Mapili, 408 SCRA 484 (2003).

²⁸ Rollo, p. 11.

²⁹ Id. at 12.

³⁰ Id. at 17.

³¹ Catungal v. Hao, 355 SCRA 29 (2001).

³² 245 SCRA 715 (1995).

³³ 96 Phil. 379 (1954).

³⁴ Rollo, p. 39.

³⁵ Id. at 41.

³⁶ Catungal v. Hao, supra.

³⁷ Rollo, pp. 42-43.

³⁸ Id. at 43.

³⁹ Id. at 42.

⁴⁰ Id. at 65.

⁴¹ Rule 42, Rules of Court.

⁴² Shoemart, Inc. v. CA, 190 SCRA 189 (1990).

⁴³ Catungal v. Hao, supra.

Back to Home | Back to Main