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contract are clear and leave no doubt as to the intention of the

contracting parties, the literal meaning of its stipulations shall
control. The agreement or the contract between the parties is the
formal expression of the partiesÊ rights, duties and obligations and
where there is nothing in it which is contrary to law, morals, good
customs, public policy or public good, its validity must be sustained.

542 SUPREME COURT REPORTS ANNOTATED

_______________
Dela Torre vs. Bicol University
* SECOND DIVISION.
G.R. No. 148632. August 31, 2005.*

543
BELEN DELA TORRE, petitioner, vs. BICOL
UNIVERSITY, represented by DR. LYLIA CORPORAL-
SENA and/or DR. EMILIANO ABERIN, respondents. VOL. 468, AUGUST 31, 2005 543

Dela Torre vs. Bicol University

Obligations and Contracts; Lease; Due Process; A contract of
lease, if pre-termination is allowed or agreed upon, should be
allowed on a ground or grounds mentioned in the pre-termination Same; Same; Words and Phrases; The phrase „poses danger‰
letter·due process demands that a party to a contract should be does not contemplate a situation where injury or damage has
fully apprised as to why the contract is being pre-terminated so he already been inflicted, or that illness or disease has already spread
will allow know if the ground or grounds relied upon are allowed ·it is enough that the danger sought to be prevented may be
and provided for in the contract.·A contract of lease, if pre- aggravated by the continued operation of the subject eatery.·
termination is allowed or agreed upon, should be allowed on a Petitioner insists that the contract of lease should not have been
ground or grounds mentioned in the pre-termination letter. Only terminated because there was neither any evident incident that
the ground or grounds stated therein should be considered in the transpired in the canteen nor any sickness or illness having been
contractÊs pre-termination. This is in keeping up with the principle contracted by any member of the BU community on account of the
of due process. Due process demands that a party to a contract food or beverages they were selling. We do not agree. Termination of
should be fully apprised as to why the contract is being pre- the contract can be effected if the leased premises poses danger to
terminated so he will know if the ground or grounds relied upon are the security and safety of the BU property, its students and
allowed and provided for in the contract. To allow the pre- personnel. The phrase „poses danger‰ does not contemplate a
termination for a reason other than that contained in the pre- situation where injury or damage has already been inflicted, or that
termination letter is unfair to the other party. This will deprive him illness or disease has already spread. It is enough that the danger
the right to air his side on the matter. If there are other grounds sought to be prevented·the spread of cholera·may be aggravated
that would justify the pre-termination of the contract, the same by the continued operation of petitionerÊs eatery.
should be included in the pre-termination letter. If said grounds are
not mentioned therein, they should not be considered. Actions; Pleadings and Practice; Counterclaims; A counterclaim
partakes the nature of a complaint and/or cause of action against the
Same; Same; A contract constitutes the law between the parties, plaintiff in a case.·Petitioner contends that respondent already
and they are, therefore, bound by its stipulations.·It is a time- waived and abandoned the other grounds or violations they raised
honored rule that a contract constitutes the law between the parties in their Answer for failure to mention them in the pre-termination
and they are, therefore, bound by its stipulations. If the terms of a letter. Such contention is partially correct. It is correct in the sense

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SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM

that respondents cannot utilize these grounds in the determination University (BU for brevity), through its then president Patria G.
of whether the termination of the contract of lease was validly made Lorenzo, entered into a Contract of Lease allowing plaintiff to
for the simple reason that same were not mentioned in the construct and operate an eatery business within defendant
termination letter. However, as to petitionerÊs liability for these universityÊs compound for a monthly rental of Php 5.00 per square
violations, i.e., nonpayment of rentals and deficiency rentals, and meter. A total of forty-nine (49) square meters, or seven meters long
payment of electric and water consumption, respondents have not and seven meters wide, were leased to plaintiff.
relinquished their claim thereon. In fact, respondents filed a After plaintiff completed the construction of her canteen valued
counterclaim to collect the amounts due them. A counterclaim at Php110,000.00, she started to operate the same after compliance
partakes of the nature of a complaint and/or a cause of action with all the necessary license and permits.
against the plaintiff in a case. The RTC ordered petitioner to pay On February 28, 1994, defendant Lylia Corporal-Sena brought to
rentals and back rentals, as well as the amount equivalent to her the attention of plaintiff the discovery of illegal electrical
consumption of power and water coming from her unauthorized and connections in her eatery, which were tapped to the mainline of the
illegal tap in BUÊs power and water lines. The Court of Appeals university, and at the same time demanding settlement or payment
affirmed said award and we have no reason to deviate therefrom. of the unauthorized consumption. To determine plaintiff Ês
accountability, defendant universityÊs electrician, Engr. Arturo
PETITION for review on certiorari of the decision and Gesmundo, was directed to inspect the appliances and lights
resolution of the Court of Appeals. installed in plaintiff Ês

544
_______________

1 Penned by Associate Justice Rodrigo V. Cosico with Associate Justices

544 SUPREME COURT REPORTS ANNOTATED
Ramon A. Barcelona and Alicia L. Santos, concurring.
Dela Torre vs. Bicol University 2 Exh. „A‰; Records, pp. 6-8.

The facts are stated in the opinion of the Court. 545

Ricardo C. Orias, Jr. for petitioner.
Emmanuel S. Flores for respondent. VOL. 468, AUGUST 31, 2005 545
Dela Torre vs. Bicol University
CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule canteen. Plaintiff was fist assessed the amount of Php25,500.00,
45 of the 1997 Rules of Civil Procedure which seeks to set which was later on reduced to Php9,726.48, payable either in full or
1
aside the decision of the Court of Appeals dated 26 installment, at the option of [plaintiff Ês] husband, who is employed
January 2001 which affirmed with modification the at BU.
decision of Branch 8 of the Regional Trial Court (RTC) of Simultaneous with the assessment of unpaid electrical
Legazpi City ordering, among other things, the termination consumptions, plaintiff was likewise assessed her unpaid rentals
2
of the Contract of Lease subject of this case, and its from April 2, 1990 up to May 3, 1994 in the amount of
Resolution dated 19 June 2001 denying petitionerÊs motion Php14,750.00.
for reconsideration. In the meantime, defendant Sena issued Office Memorandum
The factual antecedents are stated in the decision of the No. 178 dated August 2, 1994 directing the persons named therein
Court of Appeals. to stop the operation of small temporary stores and ambulant
vendors within the BU compound and to confiscate the goods if they
„On April 2, 1990, plaintiff Belen dela Torre and defendant Bicol continue to defy the order.

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SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM

On September 17, 1994, defendant Aberin sent a handwritten respondents had a sinister motive of favoring, if not
memorandum to plaintiff Ês husband, Romeo dela Torre, enjoining associating with, a certain Edgar Narvaez, another BU
compliance with the earlier memorandum to avoid embarrassment. personnel, in the opening and operation of the same line of
In reply thereto, Romeo dela Torre wrote Dr. Aberin on business she is in. She asked that respondents be ordered
September 19, 1994 inquiring as to the authenticity of the to pay the cost of the building, lost income for the
handwritten memorandum and in essence invoking the authority remaining two years, moral damages, attorneyÊs fees,
given to his wife to operate the canteen. Again, on September 22, exemplary damages and 5
costs of suit.
1994, defendant Sena issued Office Memorandum No. 206 In their Answer filed on 28 November 1994,
reiterating the stoppage of operation of temporary stores within the respondents revealed that petitioner had blatantly and
campus. In a letter dated October 4, 1994, defendant Sena repeatedly violated the terms and conditions of the
terminated the Contract of Lease effective ninety (90) days from Contract of Lease, among them being:
October 4, 1994 stating therein that „it is the desire of the Board of
Regents to rid the campus of ambulant vendors, small stores, a) She has exceeded the area allowed her by the
rolling stores, etc. operated within the reservation of the University university under the contract, i.e., that she could
as a way of protecting the constituencies from any form of occupy only an area of 49 sq. meters, the dimension
sickness/ailments/security that may be brought by these stores.‰ of which is 7 meters wide by 7 meters long; the
Believing that the unilateral termination of the lease contract by actual area occupied is some 88 sq. meters.
the defendant was a violation of their agreement, plaintiff b) The building is not made of light materials.
instituted an action for breach of contract with damages before the c) Plaintiff did not pay rentals in accordance with the
3
court a quo. terms of the contract.
Petitioner Belen dela Torre filed the Complaint for Breach d) Plaintiff did not put up her own power and water
4
of Contract and Damages on 18 October 1994 before the supply but illegally tapped the same from the
RTC of Legazpi City which was raffled to Branch 8 thereof. universityÊs power and water lines.
She
On account of these violations, respondents maintain that
they have every right to terminate the contract. They pray
_______________
that the complaint be dismissed, and on the compulsory
3 Rollo, pp. 61-62. counterclaim, they ask that petitioner be ordered to
4 Records, pp. 1-14. immediately vacate the premises, to pay for the power and
water consumptions occasioned by her illegal tapping from
546 the universityÊs facilities, deficiency rentals, moral and
exemplary damages, attorneyÊs fees and costs of suit.
546 SUPREME COURT REPORTS ANNOTATED
_______________
Dela Torre vs. Bicol University
5 Id., at pp. 21-27.
alleged that from the time the lease contract was
547
terminated by respondent Lylia Sena on 4 October 1994,
she still had two (2) more years to operate the eatery before
the expiration of the lease which would coincide with the VOL. 468, AUGUST 31, 2005 547
retirement of her husband from Bicol University (BU). In
Dela Torre vs. Bicol University
terminating the lease contract, she claimed that

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SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM

On 10 March 1995, an ocular inspection was conducted on 548 SUPREME COURT REPORTS ANNOTATED
6
the eatery being operated by petitioner. On 21 March Dela Torre vs. Bicol University
1995, pre-trial was7 terminated. After trial, the RTC
rendered its decision on 24 June 1996. It said in part:
„ALL THE FOREGOING CONSIDERED, judgment is hereby
„Plaintiff Ês violations are apparent, substantiated and remained rendered in favor of the defendants and against the plaintiff. The
uncontroverted. These violations by itself (sic) already constitute Contract of Lease is hereby ordered terminated and the plaintiff is
breach of the contract. Basic is the principle that he who comes to hereby ordered (1) to vacate the leased premises within thirty (30)
court must come with clean hands. In the instant case, here is the days from receipt of this Decision and to remove any and all
plaintiff who is herself guilty of breach of contract and yet charges improvements she has introduced thereon; (2) to pay the rentals
the defendants also of breach for the latterÊs exercise of its right to from October 14, 1994 until she vacates the premises corresponding
terminate in case of any violation of the contract. The court finds it to the 75.3 square meters actually occupied by her; (3) to pay such
quite ironic. amount representing power and water consumptions occasioned by
... her illegal and unauthorized tapping from the time of the operation
DefendantsÊ acceptance of payment for rentals beyond the grace of her canteen until disconnection; (4) to pay deficiency rentals from
period and the assessment of power consumptions despite the July 15, 1990 to September 1994 pertaining to 26.3 square meters
illegal tapping may be deemed to be a waiver of their right to (75.3 sq. m.) as found out by the court during the ocular inspection,
rescind or terminate on these grounds. This is probably the reason minus 49 square meters) the area in excess of the 49 square meters
why they chose to terminate the contract „as a way of protecting the allowed in the contract at the rate of P5.00 per square meters; (5) to
[constituencies] from any form of sickness/ailments/security that pay the costs.‰
may be brought about by (these) stores. x x x in consonance with the 8

Department of Health in safeguarding the health of the BU

Dissatisfied, petitioner appealed to the Court of Appeals.
population and for the protection and general safety of the
In the meantime, she vacated the leased premises on 12
university as a whole.‰ (Exhibit „F‰). Plaintiff assailed this by trying
December 1996, the day her husband, Romeo dela Torre,
to prove that no violent incident transpired in her canteen and no
retired from BU.
sickness or illness has been contracted by any of the BU community
On 26 January 2001, the Court of Appeals affirmed the
on account of the food being served at her canteen. As the contract
RTC decision with modification as to the award of costs.
itself is worded: „x x x if the leased premises POSES DANGER to
The decretal portion of the decision reads:
the security and safety of the BU property, its students and „WHEREFORE, premises considered, the appealed decision is
personnel and/or other analogous courses.‰ Danger means a hazard, hereby AFFIRMED WITH MODIFICATION as to the award of
peril or that which may injure or harm. It does not, require that costs which is hereby deleted for lack of basis.‰
some form of sickness or injury has in fact been sustained.
DefendantsÊ act of terminating the contract was, therefore, but an The motion for reconsideration filed by petitioner was
exercise of its right under the contract and is legal.‰ denied on 19 June 2001.
Petitioner is now before us via an appeal under Rule 45
It disposed of the case as follows: of the 1997 Rules of Civil Procedure. She contends that:

_______________ THE RESPONDENT COURT OF APPEALS COMMITTED

REVERSIBLE ERROR IN PRE-TERMINATING THE CONTRACT
6 Id., at p. 55. OF LEASE BETWEEN PETITIONER AND PRIVATE
7 Id., at pp. 162-174. RESPONDENT

548
_______________

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SUPREME COURT REPORTS ANNOTATED VOLUME 468
8 Id., at p. 175.
VOL. 468, AUGUST 31, 2005
Dela Torre vs. Bicol University
BASED ON THE GROUNDS NOT MENTIONED IN THE PRE-
TERMINATION LETTER DATED OCTOBER 4, 1994 WHOSE
GROUNDS OR VIOLATIONS WERE ALREADY WAIVED AND
ABANDONED BY PRIVATE RESPONDENT BEING NOT
MENTIONED IN THE PRE-TERMINATION LETTER.
She poses the question: Can a Contract of Lease be pre-
terminated on a ground not mentioned in the pre-
termination letter?
We answer in the negative.
A contract of lease, if pre-termination is allowed or
agreed upon, should be allowed on a ground or grounds
mentioned in the pre-termination letter. Only the ground or
grounds stated therein should be considered in the
contractÊs pre-termination. This is in keeping up with the
principle of due process. Due process demands that a party
to a contract should be fully apprised as to why the
contract is being pre-terminated so he will know if the
ground or grounds relied upon are allowed and provided for
in the contract. To allow the pre-termination for a reason
other than that contained in the pre-termination letter is
unfair to the other party. This will deprive him the right to
air his side on the matter. If there are other grounds that
would justify the pre-termination of the contract, the same
should be included in the pre-termination letter. If said
grounds are not mentioned therein, they should not be
considered.
Petitioner argues that the Court of Appeals erred when
it pre-terminated the contract of lease on grounds not
mentioned in the pre-termination letter dated 04 October
1994. She adds that these grounds or violations have
already been waived and abandoned by their non-inclusion
in the pre-termination letter.
The argument is fully misleading.
Quite the contrary, the Court of Appeals stated clearly in
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its decision that only grounds contained in the termination
letter should be considered in resolving the issue of
549 whether
550
549
550 SUPREME COURT REPORTS ANNOTATED
Dela Torre vs. Bicol University
or not there was a valid termination of the lease contract
by respondents. It said:
The sole issue to be resolved is whether or not there was a valid
termination of the lease by the appellees.
In the resolution of the foregoing issue, the grounds for
termination of the Lease Contract advanced by defendants in their
Answer which were not contained in the termination letter should
not be considered. This is so because they are deemed to have been
waived or condoned by their non-inclusion in the termination letter.
Besides, plaintiff Ês cause of action is premised on the termination
letter which does not include the other grounds mentioned in the
Answer. Hence, they are irrelevant and immaterial to the present
9
case.
The ground10or justification contained in the termination
letter dated 04 October 1994 is the protection of the BU
population from any form of sickness/ailments/security that
may be brought about by ambulant vendors, small stores
and rolling stores operating within the campus of BU. The
termination of the contract was prompted by the report of
the Department of Health that the province was affected by
cholera. Part of the letter reads:
As President, it is the desire of the Board of Regents that the
campus should be rid of ambulant vendors, small stores, rolling
stores, etc. operated within the reservation of the University as a
way of protecting the constituencies from any sickness/ailments/
security that may be brought about by these stores. This move is
also in consonance with the Department of Health in safeguarding
the health of the BU population and for the protection and general
safety of the university as a whole.
On the other hand, the grounds or violations stated in
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SUPREME COURT REPORTS ANNOTATED VOLUME 468
respondentsÊ Answer were: area occupied exceeded that
allowed in the contract, the store was not made of light
materials,
_______________
9 Rollo, p. 65.
10 Exh. „F‰; Records, p. 13.
VOL. 468, AUGUST 31, 2005
Dela Torre vs. Bicol University
payments of rentals were not in accord with the contract,
and failure to put up own power and water supply.
Can respondents now validly terminate the contract of
lease on the ground stated in the letter of termination?
The answer is YES.
It is a time-honored rule that a contract constitutes the
law between the parties and they are, therefore, bound by
its stipulations. If the terms of a contract are clear and
leave no doubt as to the intention of the contracting
parties,11 the literal meaning of its stipulations shall
control. The agreement or the contract between the
parties is the formal
12
expression of the partiesÊ rights, duties
and obligations and where there is nothing in it which is
contrary to law, morals, good customs, 13public policy or
public good, its validity must be sustained.
In the case at bar, the contract of lease entered into by
the parties permits termination or rescission. Paragraphs
4(d) and 5 authorize the same.
4. d) Lessor has the right to terminate this contract and
consequently to order the lessee to vacate the
premises by removing her eatery and all the
improvements she has introduced thereon, at her
own expense, in the event that lessor needs the
place for the expansion of its project such as
construction of new buildings, roads, housing units
for the personnel etc., and if the leased premises
poses danger to the security and safety of the BU
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property, its students and personnel/and/or other
analogous courses.
...
5. That the parties hereby agree and bind themselves
to abide by the foregoing terms and conditions
faithfully; otherwise,
_______________
551
11 R & M General Merchandise, Inc. v. Court of Appeals, G.R. No.
144189, 05 October 2001, 366 SCRA 679.
551 12 Arwood Industries, Inc. v. D.M. Consunji, Inc., G.R. No. 142277, 11
December 2002, 394 SCRA 11.
13 Hanil Development Co., Ltd. v. Court of Appeals, G.R. No. 113176
and M.R. Escobar Explosive Engineers, Inc. v. Court of Appeals, G.R. No.
123342, 30 July 2001, 362 SCRA 1.
552
552 SUPREME COURT REPORTS ANNOTATED
Dela Torre vs. Bicol University
any violation thereof shall be a ground for either the rescission or
termination of this Contract. (Emphasis supplied.)
Paragraph 4(d) gives BU the right to terminate the
contract and to order petitioner to vacate the premises by
removing her eatery and all the improvements she has
introduced thereon, at her own expense, if the leased
premises poses danger to the security and safety of the BU
property, its students and personnel. The reason for the
termination as stated in the letter of termination is
obviously covered by this paragraph. We agree with the
Court of Appeals when it said:
The reason stated in the letter of termination is covered by the
stipulation of the parties, particularly item no. 4(d) thereof, which
grants to the lessor the right to terminate the contract even before
its expiration, if the leased premises poses danger to the security
and safety of the BU property, its students and personnel and/or
other analogous cases.
As to what circumstances may be considered in determining
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SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM

whether or not the leased premises poses danger to the security and contract of lease to be justified and in accordance with the
safety of the BU community is a matter that is lodged to the authority granted in the contract.
discretion of BU, the only limitation being that the prerogative We fully agree with the Court of Appeals that the
should be exercised in good faith and not arbitrarily. To hold termination was made in good faith and not in an arbitrary
otherwise would be tantamount to supplanting item no. 4(d) of the manner. There was no bad faith and arbitrariness on the
Lease Contract, which grants in no uncertain terms the unilateral part of the respondents. As shown by Office Memorandum
right of the lessor to cancel or rescind the lease contract if upon its No. 178, s. of 1994, dated 2 August 1994 issued by
determination the leased premises poses danger to the security and respondent Sena, the order not to allow the continued
safety of the BU community . . . . operation and presence of ambulant vendors and
... temporary stores was applied to all without any particular
At the time BU terminated the lease contract, there was a individual being singled out. In other words, no ambulant
prevalence of Cholera in the area and the province was identified by vendor or temporary store holder was spared from such
the Department of Health as one of the affected areas. In order to directive.
contain further spread of the disease, BU deemed it necessary to Petitioner contends that respondents already waived
stop the operation of ambulant vendors and temporary stores and abandoned the other grounds or violations they raised
operated by its employees within the reservation. Hence, BUÊs in their Answer for failure to mention them in the pre-
exercise of its discretion under item no. 4(d) of the Lease Contract termination letter.
was done in good faith. Such contention is partially correct. It is correct in the
sense that respondents cannot utilize these grounds in the
Petitioner insists that the contract of lease should not have determination of whether the termination of the contract of
been terminated because there was neither any evident lease was validly made for the simple reason that same
inci- were not mentioned in the termination letter. However, as
553
to petitionerÊs liability for these violations, i.e., nonpayment
of rent-

VOL. 468, AUGUST 31, 2005 553

_______________
Dela Torre vs. Bicol University
14 TSN, 31 March 1995, p. 10.

dent that transpired in the canteen nor any sickness or 554

illness having been contracted by any member of the BU
community on account of the food or beverages they were
14 554 SUPREME COURT REPORTS ANNOTATED
selling.
We do not agree. Termination of the contract can be Dela Torre vs. Bicol University
effected if the leased premises poses danger to the security
and safety of the BU property, its students and personnel. als and deficiency rentals, and payment of electric and
The phrase „poses danger‰ does not contemplate a situation water consumption, respondents have not relinquished
where injury or damage has already been inflicted, or that their claim thereon. In fact, respondents filed a
illness or disease has already spread. It is enough that the counterclaim to collect the amounts due them. A
danger sought to be prevented·the spread of cholera· counterclaim partakes of the nature of a complaint and/or a
15
may be aggravated by the continued operation of cause of action against the plaintiff in a case. The RTC
petitionerÊs eatery. ordered petitioner to pay rentals and back rentals, as well
Under the circumstances, we find the termination of the as the amount equivalent to her consumption of power and

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SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM SUPREME COURT REPORTS ANNOTATED VOLUME 468 11/2/16, 8:32 PM

water coming from her unauthorized and illegal tap in BUÊs

power and water lines. The Court of Appeals affirmed said
award and we have no reason to deviate therefrom.
WHEREFORE, premises considered, the decision dated
26 January 2001 of the Court of Appeals is hereby
AFFIRMED in toto.
SO ORDERED. © Copyright 2016 Central Book Supply, Inc. All rights reserved.

Puno (Chairman), Austria-Martinez, Callejo, Sr. and

Tinga, JJ., concur.

Judgment affirmed in toto.

Notes.·An action for rescission of a contract of lease for

violation of the lease contract must be done in the RTC
while an action for ejectment must be filed in the MeTC, in
which case the suit is subject to the requirement
concerning the need for a demand to be made before the
lessee may be considered a deforciant, unlawfully
withholding possession from the owner of the land. (San
Andres vs. Court of Appeals, 265 SCRA 368 [1996])

_______________

15 Matela v. Chua Tay, G.R. No. L-16407, 30 May 1962, 5 SCRA 163;
Philippine Columbia Enterprises Co. v. Lantin, G.R. No. L-29072, 07
June 1971, 39 SCRA 376; Dy v. Enage, G.R. No. L-35351, 17 March 1976,
70 SCRA 96; Arceo v. Oliveros, G.R. No. L-38251, 31 January 1985, 134
SCRA 308; Cokaliong Shipping Lines, Inc. v. Amin, G.R. No. 112233, 31
July 1996, 260 SCRA 122.

555

VOL. 468, AUGUST 31, 2005 555

JN Development Corporation vs. Philippine Export and
Foreign Loan Guarantee Corporation

Award of possession de facto over the subject land to a

party would not constitute res judicata as to the issue of
ownership thereof. (Javelosa vs. Court of Appeals, 265
SCRA 493 [1996])

··o0o··

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