Beruflich Dokumente
Kultur Dokumente
For our resolution is the instant Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision[1]dated August 25, 1997 and Resolution[2] dated November 13, 1997 rendered by
the Court of Appeals in CA-G.R. SP No. 43366, entitled MARLON REALTY CORPORATION, petitioner, v. HON. JUDGE
REGIONAL TRIAL COURT OF PARAAQUE, BRANCH 258 and ELVIRA D. DUMLAO, ET AL., respondents.
On November 26, 1991, spouses Elvira and Cesar Dumlao, petitioners, and Marlon Realty Corporation,
respondent, entered into a Contract to Sell[3] involving a 109 square meter lot
in Welcome Village, Paraaque City. The terms of payment are:
The sum of P61,000.00 shall be paid upon the signing of the contract; and
The balance of P157,000.00 shall be paid with interest at 24% per annum within six (6) months.
Petitioners paid P61,000.00 as downpayment upon the signing of the contract. In the meantime, interest
began to accrue on the P157,000.00 balance of the purchase price.
On November 4, 1992, the Urban Bank informed respondent corporation that petitioners loan
of P148,000.00, intended as payment for their obligation, was approved. However, the bank imposed the following
conditions: the amount shall be released only after its mortgage lien shall have been registered in the Registry of
Deeds and annotated on petitioners land title; and that respondent must first execute a deed of absolute sale in
favor of petitioners.
On November 26, 1992, the parties entered into a Compromise Agreement[4] whereby petitioners agreed to
pay respondent, on or before March 26, 1993, the amount of P38,203.33 representing the accrued interest as of that
date on the P157,000.00 balance of the purchase price; and that respondent shall execute a Deed of Sale to facilitate
the transfer of title to petitioners. On the same day, petitioners paid the buyers equity of P9,000.00.
On December 1, 1992, respondent, pursuant to the Compromise Agreement, executed a Deed of Sale[5] in
favor of petitioners. But they refused to pay the interest agreed upon despite respondents repeated demand.
On January 26, 1995, respondent filed with the Metropolitan Trial Court (MTC), Branch 78, Paraaque City a
complaint for a sum of money against petitioners. The MTC, in its Decision[6] dated June 17, 1996, dismissed the
complaint, holding that it is for specific performance cognizable by the Regional Trial Court (RTC).
On appeal by respondent, the RTC, Branch 258, Paraaque City rendered its Decision dated November 19,
1996 affirming the MTC judgment dismissing the complaint not on the ground of lack of jurisdiction, but for lack of
cause of action. [7]
Petitioners filed a motion for reconsideration but it was denied by the RTC in its Order of February 04, 1997.
On February 28, 1997, respondent filed with the Court of Appeals a petition for review. In its Decision
dated August 25, 1997, the appellate court held that respondents complaint is for a sum of money, the Contract to
Sell being a unilateral acknowledgment of an existing debt on petitioners part. The dispositive portion of the
Decision reads:
WHEREFORE, premises considered, the petition is hereby given DUE COURSE and the assailed Decision dated
November 19, 1996 of the RTC of Paraaque, Branch 258, and its Order dated February 4, 1997 denying therein
plaintiffs Motion for Reconsideration, as well as the Decision dated June 17, 1996 of the Metropolitan Trial Court of
Paraaque, Branch 78, are REVERSED and SET ASIDE.
A new judgment is hereby entered ordering defendant spouses Cesar and Elvira Dumlao to pay the sum
of P109,929.79 representing the accumulated interests as of January 6, 1995with interest at 2% per month computed
from January 6, 1995.
SO ORDERED.[8]
Petitioners filed a motion for reconsideration but it was denied by the Court of Appeals in its Resolution
dated November 13, 1997.
The issue for our resolution is whether petitioners are liable to pay interest on the balance of the purchase
price.
Petitioners insist that they are not liable to pay interest since the loan proceeds were released, not to
petitioners, but directly to respondent; and that pending the release, no interest should accrue.
Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in good faith.[9] We must look into the terms of the contract to determine the respective obligations
of the parties thereto. If the terms of a contract are clear and leave no doubt upon the contracting parties intention,
then such terms should be applied in their literal meaning.[10]
In this case, there is no question that the parties voluntarily entered into a Contract to Sell a parcel of
land. The terms of payment of the purchase price are clear and unambiguous, thus:
SECOND That in consideration of the agreement to sell the above described property, the VENDEE obligates
himself/herself to pay the VENDOR the sum of TWO HUNDRED EIGHTEEN THOUSAND (P218,000.00) PESOS,
Philippine Currency from the date of execution of this contract until paid as follows:
a) The amount of SIXTY ONE THOUSAND xxx (P61,000.00) PESOS when this contract is signed, and
b) The balance of ONE HUNDRED FIFTY SEVEN THOUSAND (P157,000.00) PESOS shall be paid with interest at 24% per
annum to be computed based on the outstanding and payable balance, as of the date of downpayment, within a
period of SIX (6) MONTHS x x x. Any installment not paid on or before the due date, or within the grace period of five
(5) days thereafter, shall bear a penalty of 2% per month based on the remaining unpaid monthly installments. Note:
As per agreement, the amount of P148,000.00 is receivable thru an URBAN BANK Letter of Guaranty (Pag-ibig Loan)
THIRD That demand for payment by the VENDOR is not necessary to make the VENDEE incur delay
(default). Note: Buyers equity is P9,000.00.
Pursuant to the above agreement, it is clear that a 24% interest per annum on the balance
of P157,000.00 shall be paid to respondent by petitioners. Having signed the contract, petitioners are bound to
comply with its terms and conditions in good faith. We reiterate that the contract is the law between them.
We observe that respondent, faithful to its part of the bargain, executed a deed of sale in favor
of petitioners. In fact, a Transfer Certificate of Title was already issued in their names. Fairness demands that
petitioners also fulfill their obligation to pay interest on the balance of the purchase price.
WHEREFORE, we DENY the petition. The assailed Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 43366 are AFFIRMED.
SO ORDERED.
GF Equity Inc. vs. Valenzona
FACTS
GF Equity, represented by its Chief Financial Officer, W. Steven Uytengsu, hired Valenzona as head coach of the
Alaska basketball team in the PBA under a contract of employment. He was tasked to coach at all practices and games
scheduled for the Alaska team, coach exhibition games, coach if invited to participate in any all-star game, attending
every event conducted, play-off games, etc.
He was also tasked to comply with all requirements respecting to the conduct of its team and players, to implement.
He also agreed to report from time to time as fixed by the corporation in good physical condition, give his best
services, loyalty, to be neatly and fully attired in public and to conduct himself on and off the court according to the
highest standards of honesty, morality, fair play and sportsmanship, and not to do anything detrimental to the best
interest of the corporation.
He also agreed to endorse the corporations products in commercial advertising, promotions, will allow himself to be
taken pictures with others for still photographs, motion pictures or TV. For his services, he will be paid P35, 000.00
monthly, net of taxes, provide him with a service vehicle and gasoline allowance. The contract was for two (2) years
starting January 1, 1988 to December 31, 1989, with the condition that if at any time during the contract, the coach
fails to exhibit sufficient skill or competitive ability to coach the team, the contract can be terminated by the
corporation. (Paragraph 3)
Before signing the contract, Valenzona consulted his lawyer who pointed out that the contract was one-sided, but
still, Valenzona acceded to the terms of the contract as he had trust and confidence in Uytengsu who recommended
him to GF Equity.
Alaska placed third both in the open and all-Filipino PBA Conference in 1988, he was advised of the termination of his
services by way of a letter dated September 26, 1988, invoking their right as specified in paragraph 3 of the contract
and to return the service vehicle no later than September 30, 1984. He will still be paid the balance of P75, 868.38 for
his services. Six (6) years after or on July 30, 1994, Valenzonas counsel demanded from GF Equity payment of
compensation arising from the arbitrary and unilateral termination of his employment. But GF Equity refused the
claim. Valenzona filed before the RTC of Manila a complaint for breach of contract with damages, ascribing bad faith,
malice and disregard to fairness and to the rights of the plaintiff by unilaterally and arbitrarily pre-terminating the
contract without just cause and legal and factual basis. He prayed award for damages, moral damages, exemplary
damages, attorneys fees and cost of the suit. He challenged the condition in paragraph 3 as lacking the elements of
mutuality of a contract, a clear transgression of Art. 1308 of the NCC and reliance thereon did not warrant his
unjustified and arbitrary dismissal.
GF Equity maintained that it merely exercised its right under the contract to pre-terminate Valenzona due to
incompetence, and that he was guilty of laches, in any event, complaint should be instituted before a labor arbiter.
The trial court dismissed the complaint on June 28, 1997 and it declared Valenzona as fully aware of the bargain. The
CA reversed the RTCs decision and ordered GF Equity to pay him damages. The CA concluded that GF Equity abused
its right by arbitrarily terminating Valenzonas employment, finding Valenzonas claim for damages as valid. The court
ordered GF Equity to pay compensatory damages, moral damages, exemplary damages and attorneys fees.
ISSUE
Whether or not, the CA concluded wrongly from established facts in a manner violative of applicable laws and
established jurisprudence.
RULING
GF Equity argued that it entered into a contract protected by law, as it was not contract to law, morals, good customs
public policy or public order, hence, no bad faith. Valenzona is guilty of laches for his unexplained inaction of six (6)
years.In the case at bar, paragraph 3 gives GF Equity the unbridled prerogative to pre-terminate the contract
irrespective of the soundness, fairness, or reasonableness, or even lack of bass of its opinion. To validate the
paragraph would open the gate for arbitrary and illegal dismissals, for void contractual stipulations would be used as
justification therefor.Laches applies to equity, prescription applies to law. The claims was filed within the statutory
period of prescription, doctrine of laches cannot be applied. The action was filed for breach of contract, way well
within the prescriptive period of ten (10) years, considering he filed the action six (6) years from the date of his cause
of action.Valenzona is entitled to recover actual damages, however, award for moral damages, exemplary damages,
must be set aside, as there is no showing that GF Equity acted in a wanton, fraudulent, reckless, oppressive manner.
Attorneys fees are awarded because GF Equity refused to pay the balance of Valenzonas salaries therefore to
protect himself, was compelled to litigate.
PHILIPPINE NATIONAL BANK petitioner, vs, THE HON. COURT OF "PEALS and AMBROSIO PADILLA, respondents.
FACTS: Private respondent (PR) Ambrosio Padilla, applied for and was granted a credit line of 321.8 million, by petitioner PNB.
This was for a term of 2 years at 18% interest per annum and was secured by real estate mortgage and 2 promissory notes
executed in favor of Petitioner by PR. The credit agreement and the promissory notes, in effect, provide that PR agrees to be
bound by increases to the interest rate stipulated, provided it is within the limits provided for by law.
Conflict in this case arose when Petitioner unilaterally increased the interest rate from 18% to: (1) 32% [July 1984]; (2) 41%
[October 1984]; and (3) 48% [November 1984], or 3 times within the span of a single year. This was done despite the numerous
letters of request made by PR that the interest rate be increased only to 21% or 24%.
PR filed a complaint against Petitioner with the RTC. The latter dismissed the case for lack of merit. Appeal by PR to CA resulted
in his favor. Hence the petition for certiorari under Rule 45 of ROC filed by PNB with SC.
ISSUE: Despite the removal of the Usury Law ceiling on interest, may the bank validly increase the stipulated interest rate on
loans contracted with third persons as often as necessary and against the protest of such persons.
HELD: NO
RATIO: Although under Sec. 2 of PD 116, the Monetary Board is authorized to prescribe the maximum rate of interest for loans
and to change such rates whenever warranted by prevailing economic and social conditions, by express provision, it may not do
so oftener than once every 12 months. If the Monetary Board cannot, much less can PNB, effect increases on the interest rates
more than once a year.
Based on the credit agreement and promissory notes executed between the parties, although PR did agree to increase on the
interest rates allowed by law, no law was passed warranting Petitioner to effect increase on the interest rates on the existing loan
of PR for the months of July to November of 1984. Neither there being any document executed and delivered by PR to effect such
increase.
For escalation clauses to be valid and warrant the increase of the interest rates on loans, there must be: (1) increase was made
by law or by the Monetary Board; (2) stipulation must include a clause for the reduction of the stipulated interest rate in the event
that the maximum interest is lowered by law or by the Monetary board. In this case, PNB merely relied on its own Board
Resolutions, which are not laws nor resolutions of the Monetary Board.
Despite the suspension of the Usury Law, imposing a ceiling on interest rates, this does not authorize banks to unilaterally and
successively increase interest rates in violation of Sec. 2 PD 116.
Increases unilaterally effected by PNB was in violation of the Mutuality of Contracts under Art. 1308. This provides that the validity
and compliance of the parties to the contract cannot be left to the will of one of the contracting parties. Increases made are
therefore void.
Increase on the stipulated interest rates made by PNB also contravenes Art. 1956. It provides that, no interest shall be due
unless it has been expressly stipulated in writing. PR never agreed in writing to pay interest imposed by PNB in excess of 24%
per annum. Interest rate imposed by PNB, as correctly found by CA, is indubitably excessive.
ODYSSEY PARK, INC vs. HONORABLE COURT OF APPEALS and UNION BANK OF THE PHILIPPINES
(Pearl)
Facts of the Case
Bancom Development Corporation and Odyssey Park, Inc., entered into a Contract to Sell, whereby the former
agreed to sell to the latter the parcel of land with an area of 8,499 square meters situated in Baguio City and the
structure constructed thereon identified as the Europa Clubhouse.
Subsequently, in a document entitled "Separate Deed of Conveyance", Bancom confirmed and acknowledged
that it has ceded, transferred and conveyed in favor of Union Bank all the rights, title and interest it has over the
property.
The purchase price of P3,500,000.00 was, per Section 2 of the Contract to Sell, with the agreement that
Sec. 5: In the event Odyssey fails to pay any portion of the purchase price of the Property or the interest and
service charge thereon as and when it falls due, or otherwise fails to comply with or violate any of the provisions
of this Contract, Bancom may at its absolute discretion cancel and rescind this Contract and declare the same as
null, void and no further force and effect by serving on Odyssey a written notice of cancellation and rescission
thirty (30) days in advance.
In the event this Contract is cancelled and rescinded as provided in this Section, all the amounts which the
Odyssey may have paid to Bancom pursuant to and in accordance with this Contract shall be forfeited in favor of
Bancom as rentals for the use and occupancy of the Property and as penalty for the breach and violation of this
Contract. Furthermore, all the improvements which Odyssey may have introduced on the Property shall form part
thereof and belong to Bancom without right of reimbursements to Odyssey; Provided, that Bancom may at its
absolute discretion instead require Odyssey to remove such improvements from the Property at expense of
Odyssey.
Mr. Vicente A. Araneta, President of Europa Condominium Villas, Inc., wrote Union Bank, a letter stating that the
Europa Center was reported to prospective buyers as well as government authorities as part of common areas
and amenities under the condominium concept of selling to the public and for that reason wants to make it of
record that Europa Condominium Villas, Inc., questions the propriety of the contract to sell.
Odyssey, through its Chairman of the Board, Mr. Carmelito A. Montano, wrote Bancom a letter stating that it
acknowledges receipt of a copy of the letter-protest from the Europa Condominium Villas, Inc., and that in the
meantime that there is a question on the propriety of the sale, it is stopping/withholding payments of the
amortization. On the same date Bancom, through its Senior Vice-President, wrote Europa Condominium Villas,
Inc. a letter explaining that the Europa Center and the parcel of land on which it is built are not part of the Europa
Condominium Villas, Inc.
Union Bank wrote Odyssey Park a letter demanding payment of the overdue account of inclusive of interest and
service charges, otherwise the contract to sell would be cancelled and rescinded. Odyssey wrote Union Bank a
letter proposing a manner of settlement which Union Bank answered asking for more details of the proposal. The
series of communications led to the drafting of a Memorandum of Agreement which was not, however, signed by
the parties.
Union Bank, through counsel, wrote Odyssey Park a letter formally rescinding and/or cancelling the contract to
sell and demanding that Odyssey vacate and peaceably surrender possession of the premises.
For failure of Odyssey to vacate, Union Bank filed a case for illegal detainer and damages. Odyssey, on the other
hand, filed this case for "Declaration of the Nullity of the Rescission of the Contract to Sell With Damages"
LC: Contract to Sell have been properly rescinded; dismissing the complaint for being frivolous and unfounded
CA: affirmed; MR denied
Issue: Whether or not the rescission of the contract to sell requires a cancellation or rescission of the contract by
means of a notarial act. A mere letter, or short of such a notarial act, would be utterly deficient.
In 1981, Hi-Cement Corporation through Lourdes De Leon (its Treasurer) and Antonio De Las Alas (its Chairman, now
deceased) issued four postdated checks to E.T. Henry and Co. The checks amount to P2 million. The checks are
crossed checks and are only made payable to E.T. Henrys account. However, E.T. Henry still indorsed the checks to
Atrium Management Corporation (AMC). AMC then made sure that the checks were validly issued by requesting E.T.
Henry to get some confirmation from Atrium. Interestingly, De Leon confirmed the checks and advised that the
checks are okay to be rediscounted by AMC notwithstanding the fact that the checks are crossed checks payable to no
other accounts but that of E.T. Henry. So when AMC presented the check, it was dishonored because Hi-Cement
stopped payment. Eventually, AMC sued Hi-Cement, E.T. Henry, and De Leon. The trial court ruled in favor of AMC
and made all the respondents liable.
On appeal, Hi-Cement averred that De Leons act in signing the check was ultra vires hence De Leon should be
personally liable for the check. De Leon, on the other hand, insisted that the checks were authorized by the
corporation.
ISSUE: Whether or not De Leons act of signing the check constitutes an ultra vires act hence making her personally
liable.
HELD: No, the act is not ultra vires but De Leon is still personally liable. The act is not ultra vires because the act of
issuing the checks was well within the ambit of a valid corporate act. De Leon as treasurer is authorized to sign
checks. When the checks were issued, Hi-Cement has sufficient funds to cover the P2 million.
As a rule, there are four instances that will make a corporate director, trustee or officer along (although not
necessarily) with the corporation personally liable to certain obligations. They are:
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing
its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other
persons;
2. He consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith
file with the corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.
In the case at bar, De Leon is negligent. She was aware that the checks were only payable to E.T. Henrys account yet
she sent a confirmation to Atrium to the effect that the checks can be negotiated to them (Atrium) by E.T. Henry.
Therefore, she may be held personally liable along with E.T. Henry (but not with Hi-Cement where she is an officer).
LIMITLESS POTENTIALS, INC., Petitioners,vs.THE HON. REINATO G. QUILALA, in his capacity as Presiding Judge of
the Regional Trial Court, Branch 57, City of Makati and The ROMAN CATHOLIC ARCHBISHOP OF MANILA,
Respondents
GR 157391
RCAM is the owner of advertising spaces located within the compounds of the Our Lady of Guadalupe Minor
Seminary and San Carlos Seminary in Guadalupe, Makati City. RCAM, as lessor, and LPI, as lessee, entered into the
following agreements for the lease of promotional areas:(a) wherein RCAM leased to LPI certain advertising spaces
for 4 years at a monthly rental of P11,000.00. The rentals were subject to 15% increase every two years; and(b) an
Amendment To An Agreement, pursuant to which RCAM and LPI extended the lease period for five years, with a total
duration of seven years from February 1, 1990to March 1, 1997 and wherein the monthly rental was increased to
PI2,000.00, subject to a 10% annual increase. On January 18, 1990, a Sublease Agreement was entered into by LPI and
Astro Advertising, Inc. (Astro) in which the former sublet Lot 28-B to the latter for five years. Under the agreement,
the monthly rentals were to be paid directly by Astro to the office of the RCAM. To clarify and consolidate the various
agreements previously executed by RCAM and LPI, the parties entered into a Memorandum of Agreement (MOA)
dated September 28, 1993,whereby they disregarded all prior contracts and considered them of no further force and
effect. In the MOA, RCAM leased to LPI specific advertising spaces, including those earlier subleased to Astro, for a
period of four years, at a monthly rental of P60,783.96 and subject to a 10% annual increment. When the sublease to
Astro expired in February 1995, RCAM did not turn over to LPI the possession of the sublet advertising
areas. Instead, the said areas were leased to Macgraphics Carranz International Corporation (MCIC) which erected its
own advertising signs thereon. In 1995, RCAM, sent a letter to LPI its delinquency in settling the rental obligations
which included the rentals due from Astro. The MTC rendered a Decision declaring LPI s possession of the leased
premises as lawful, but ordered the same to pay the rentals due from September 1995 until it ceased occupying the
leased premises and declaring LPI made an overpayment of P344,550.33. The court further pronounced that the
payments made directly to RCAM during the
first period should not be credited to LPI because the latter had donated the amount to RCAM. The MTC maintained
that the stipulation contained in the sublease agreement was a stipulation pour atrui under Article 1311 of the NCC.
However, the court alsomaintained that LPI should be credited for the payments made by Astro during the second
period , after the MOA took effect, to March 1995. Finally, the MTC held that LPI was obliged to pay rentals in the
amount of P414,486.50 when the complaint was filed. RCAM asserts that the Court's ruling, which directed it to
deliver to LPI the possession of the areas covered by the MOA for the remaining period of the lease, is not in accord
with the applicable laws and prevailing jurisprudence. It further insists that the MOA stipulated a fixed lease period
which had long before expired, and that the implementation of the court's ruling would in effect create a lease
relation between the parties that would commence beyond the lapse of the lease period provided for in the MOA.
ISSUE: Whether or not RCAM is still obliged to deliver the premise to LPI.
HELD: Yes. A lessee unlawfully evicted by the lessor is entitled to be restored to the possession of the property leased
for the "unused period" of the lease contract, counted from his eviction; such "unexpired portion'' of the contract
cannot be affected by the lapse of the period pending the final resolution of the complaint for ejectment filed by the
lessor. It bears stressing that in a reciprocal contract, like a lease, the period of the lease must be deemed to have
been agreed upon for the benefit of both parties, absent any language therein showing that the term was deliberately
fixed for the benefit of either the lessor or the lessee alone. Its continuance, effectivity or fulfillment cannot be made
to depend exclusively upon the free and uncontrolled choice of just one party to a lease contract. In this case, RCAM
unilaterally rescinded the contract; it had the billboards of LPI on the spaces/areas leased by the latter dismantled on
October 5, 1996, without wailing for the final outcome of the ejectment case. The MTC, RTC and the CA found this
unilateral recission of the MOA unlawful. Indisputably, RCAM was obliged to deliver to LPI the premises which it
forcibly took over on the said dale. It bears stressing that LPI had occupied the leased properly from August 1, 1993 to
October 6, 1996, or only three (3) years, two months and two days. Thus, LPI is entitled to remain in the property, as
lessee, for the unused portion of the four-year period provided for in the MOA. By so ruling, the Court would thereby
be merely Enforcing the same. As covenanted, LPI must remain in possession of the property, as lessee, for a period
of four (4) years - not a dayless. For the Court to do otherwise would be to enrich RCAM at the expense of LPI,
allowing the former to profit by its misdeeds.
JOSE V. LAGON,petitioner,
vs.
HONORABLE COURT OF APPEALS and MENANDRO V. LAPUZ,
respondents.
FACTS:
On June 23, 1982, petitioner Jose Lagon purchased two parcels of land located at Tacurong, Sultan Kudarat from the
estate of Bai Tonina Sepi. A few months after the sale, private respondent Menandro Lapuz filed a complaint for torts
and damages against petitioner before the Regional Trial Court (RTC) of Sultan Kudarat. Private respondent claimed
that he entered into a contract of lease with the late Bai Tonina Sepi over three parcels of land in Sultan Kudarat,
Maguindanao beginning 1964. It was agreed upon that private respondent will put up commercial buildings which
would, in turn, be leased to new tenants. The rentals to be paid by those tenants would answer for the rent private
respondent was obligated to pay Bai Tonina Sepi for the lease of the land. In 1974, the lease contract ended but was
allegedly renewed. When Bai Tonina Sepi died, private respondent started remitting his rent to the court-appointed
administrator of her estate. But when the administrator advised him to stop collecting rentals from the tenants of the
buildings he constructed, he discovered that petitioner, representing himself as the new owner of the property, had
been collecting rentals from the tenants. He thus filed a complaint against the latter, accusing petitioner of inducing
the heirs of Bai Tonina Sepi to sell the property to him, thereby violating his leasehold rights over it. Petitioner denied
the allegation, thus contending that the heirs were in dire need of money to pay off the obligations of the deceased.
He also denied interfering with private respondent's leasehold rights as there was no lease contract covering the
property when he purchased it; that his personal investigation and inquiry revealed no claims or encumbrances on
the subject lots. On July 29, 1986, the RTC decided in favor of the private respondent. Petitioner appealed the
judgment to the Court of Appeals. The appellate court affirmed the ruling of the trial court with modification.
ISSUE:
Whether or not the purchase by petitioner of the subject property, during the supposed existence of private
respondent's lease contract with the late Bai Tonina Sepi, constituted tortuous interference for which petitioner
should be held liable for damages.
HELD:
The Supreme Court affirmed the petition and sets aside the decision of the appellate court. Before the appellate
court, petitioner disclaimed knowledge of any lease contract between the late Bai Tonina Sepi and private
respondent. On the other hand, private respondent insisted that it was impossible for petitioner not to know about
the contract since the latter was aware that he was collecting rentals from the tenants of the building. While the
appellate court disbelieved the contentions of both parties, it nevertheless held that, for petitioner to become liable
for damages, he must have known of the lease contract and must have also acted with malice or bad faith when he
bought the subject parcels of land.
Article 1314 of the Civil Code provides that any third person who induces another to violate his contract shall be liable
for damages to the other contracting party. The Court, in the case of So Ping Bun v. Court of Appeal, laid down the
elements of tortuous interference with contractual relations: (a) existence of a valid contract; (b) knowledge on the
part of the third person of the existence of the contract and (c) interference of the third person without legal
justification or excuse. Private respondent presented in court a notarized copy of the purported lease renewal to
show the existence of a valid contract. While the contract appeared as duly notarized, the notarization thereof,
however, only proved its due execution and delivery but not the veracity of its contents. Nonetheless, after
undergoing the rigid scrutiny of petitioner's counsel and after the trial court declared it to be valid and subsisting, the
notarized copy of the lease contract presented in court appeared to be incontestable proof that private respondent
and the late Bai Tonina Sepi actually renewed their lease contract. The second element, on the other hand, in this
case, petitioner claims that he had no knowledge of the lease contract. His sellers (the heirs of Bai Tonina Sepi)
likewise allegedly did not inform him of any existing lease contract. Even the registry of property had no record of the
same. To sustain a case for tortuous interference, the defendant must have acted with malice or must have been
driven by purely impious reasons to injure the plaintiff. In other words, his act of interference cannot be justified.
Furthermore, the records do not support the allegation of private respondent that petitioner induced the heirs of Bai
Tonina Sepi to sell the property to him. The records show that the decision of the heirs of the late Bai Tonina Sepi to
sell the property was completely of their own volition and that petitioner did absolutely nothing to influence their
judgment. Private respondent himself did not proffer any evidence to support his claim. Petitioner's purchase of the
subject property was merely an advancement of his financial or economic interests, absent any proof that he was
enthused by improper motives. In sum, inasmuch as not all three elements to hold petitioner liable for tortuous
interference are present, petitioner cannot be made to answer for private respondent's losses. This case is one of
damnun absque injuria or damage without injury.
So Ping Bun v. CA
Facts:
In 1963, Tek Hua Trading Co. entered into lease agreements with lessor Dee C. Chuan and Sons, Inc. involving four (4)
premises in Binondo, which the former used to store textiles. The agreements were for one (1) year, with provisions
for month-to-month rental should the lessee continue to occupy the properties after the term. In 1976, Tek Hua
Trading Co. was dissolved, and the former members formed Tek Hua Enterprises Corp., herein respondent. So Pek
Giok, managing partner of the defunct company, died in 1986. Petitioner So Ping Bun, his grandson, occupied the
warehouse for his own textile business, Trendsetter Marketing. On March 1, 1991, private respondent Tiong sent a
letter to petitioner, demanding that the latter vacate the premises. Petitioner refused, and on March 4, 1992, he
requested formal contracts of lease with DCCSI. The contracts were executed. Private respondents moved for the
nullification of the contract and claimed damages. The petition was granted by the trial court, and eventually by the
Court of Appeals.
Issue:
Held:
(1) Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or compensation
awarded for the damage suffered. One becomes liable in an action for damages for a nontrespassory invasion of
another's interest in the private use and enjoyment of asset if (a) the other has property rights and privileges with
respect to the use or enjoyment interfered with, (b) the invasion is substantial, (c) the defendant's conduct is a legal
cause of the invasion, and (d) the invasion is either intentional and unreasonable or unintentional and actionable
under general negligence rules. The elements of tort interference are: (1) existence of a valid contract; (2) knowledge
on the part of the third person of the existence of contract; and (3) interference of the third person is without legal
justification or excuse. Petitioner's Trendsetter Marketing asked DCCSI to execute lease contracts in its favor, and as a
result petitioner deprived respondent corporation of the latter's property right. Clearly, and as correctly viewed by
the appellate court, the three elements of tort interference above-mentioned are present in the instant case.
Authorities debate on whether interference may be justified where the defendant acts for the sole purpose of
furthering his own financial or economic interest. One view is that, as a general rule, justification for interfering with
the business relations of another exists where the actor's motive is to benefit himself. Such justification does not exist
where his sole motive is to cause harm to the other. Added to this, some authorities believe that it is not necessary
that the interferer's interest outweigh that of the party whose rights are invaded, and that an individual acts under an
economic interest that is substantial, not merely de minimis, such that wrongful and malicious motives are negatived,
for he acts in self-protection. Moreover justification for protecting one's financial position should not be made to
depend on a comparison of his economic interest in the subject matter with that of others. It is sufficient if the
impetus of his conduct lies in a proper business interest rather than in wrongful motives. Where there was no malice
in the interference of a contract, and the impulse behind one's conduct lies in a proper business interest rather than
in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested,
and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to his
enterprise at the expense of respondent corporation. Though petitioner took interest in the property of respondent
corporation and benefited from it, nothing on record imputes deliberate wrongful motives or malice on him.
Petitioner argues that damage is an essential element of tort interference, and since the trial court and the appellate
court ruled that private respondents were not entitled to actual, moral or exemplary damages, it follows that he
ought to be absolved of any liability, including attorney's fees.
While we do not encourage tort interferers seeking their economic interest to intrude into existing contracts at the
expense of others, however, we find that the conduct herein complained of did not transcend the limits forbidding an
obligatory award for damages in the absence of any malice. The business desire is there to make some gain to the
detriment of the contracting parties. Lack of malice, however, precludes damages. But it does not relieve petitioner of
the legal liability for entering into contracts and causing breach of existing ones. The respondent appellate court
correctly confirmed the permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter
Marketing, without awarding damages. The injunction saved the respondents from further damage or injury caused
by petitioner's interference.
(2) Lastly, the recovery of attorney's fees in the concept of actual or compensatory damages, is allowed under the
circumstances provided for in Article 2208 of the Civil Code. One such occasion is when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest. But we
have consistently held that the award of considerable damages should have clear factual and legal bases. In
connection with attorney's fees, the award should be commensurate to the benefits that would have been derived
from a favorable judgment. Settled is the rule that fairness of the award of damages by the trial court calls for
appellate review such that the award if far too excessive can be reduced. This ruling applies with equal force on the
award of attorney's fees. In a long line of cases we said, "It is not sound policy to place in penalty on the right to
litigate. To compel the defeated party to pay the fees of counsel for his successful opponent would throw wide open
the door of temptation to the opposing party and his counsel to swell the fees to undue proportions."
Considering that the respondent corporation's lease contract, at the time when the cause of action accrued, ran only
on a month-to-month basis whence before it was on a yearly basis, we find even the reduced amount of attorney's
fees ordered by the Court of Appeals still exorbitant in the light of prevailing jurisprudence. Consequently, the
amount of two hundred thousand (P200,000.00) awarded by respondent appellate court should be reduced to one
hundred thousand (P100,000.00) pesos as the reasonable award or attorney's fees in favor of private respondent
corporation.
KULANG GR 795193 or 795 scra 19 CASE N0. 17