Case Digest (G.R. No. 150718)
Facts:
The case involves Basilio Borja, Sr. as the petitioner and Sulyap, Inc. as the private respondent, along with the Court of Appeals as a respondent. The events leading to the conflict arose from a lease agreement dated June 7, 1994, where Borja leased a one-storey office building in New Manila, Quezon City, to Sulyap, Inc. As per the agreement, Sulyap paid advance rentals, association dues, and deposits for utilities. Upon the expiration of the lease, Sulyap demanded the return of these amounts from Borja; however, he refused to return them. Consequently, Sulyap filed a complaint for sum of money with the Regional Trial Court of Quezon City on October 5, 1995. The parties eventually entered into a Compromise Agreement, which was submitted to the trial court. The court approved this agreement on October 24, 1995, stipulating that Borja would reimburse a total amount of P 30,575.00 and P 50,000.00 due to unpaid obligations, which would earn interest if not paid on time.
Despite th
...Case Digest (G.R. No. 150718)
Facts:
- Contractual Relationship and Lease Agreement
- Petitioner Basilio Borja, Sr. (lessor) owned a one-storey office building located at 12th Street, New Manila, Quezon City.
- Private respondent Sulyap Inc. (lessee) entered into a lease contract with the petitioner.
- Under the lease, Sulyap Inc. paid various amounts in advance including rentals, association dues, and deposits for electrical and telephone expenses.
- Dispute and Filing of Complaint
- Upon the expiration of the lease, the lessee demanded the return of the advance rentals, association dues, and deposits.
- Petitioner refused to return these sums, prompting the lessee to file a complaint for sum of money before the Regional Trial Court (RTC) of Quezon City, Branch 80 on October 5, 1995.
- Compromise Agreement and Judicial Approval
- The parties entered into a compromise agreement on October 16, 1995, which was duly submitted to the RTC.
- The compromise agreement detailed:
- Identification of the parties and their roles (lessor and lessee).
- The amounts held by the petitioner:
- P20,000 as a deposit for utilities.
- The payment of a 5% withholding tax amounting to P25,175 by the lessee on behalf of the petitioner, with a provision that these taxes would be reimbursed to the lessee.
- A stipulation that from the consumed P55,000 rental deposit, a balance of P50,000 was to be returned to the lessee within five days from the arrival of the bills for utility expenses.
- A penalty clause for default in payment which imposed 2% monthly interest on the outstanding amounts plus 25% attorney’s fees.
- An alternative proposed clause was mentioned during the negotiations, but the less burdensome penalty clause was chosen by the petitioner.
- On October 24, 1995, the trial court approved the compromise agreement, thereby enjoining both parties to comply with its terms.
- Failure to Pay and Subsequent Proceedings
- Petitioner failed to pay the sums of P30,575.00 (withholding taxes and association dues) and P50,000.00 (balance from rental deposit) as stipulated in the compromise agreement.
- In response, the lessee filed a motion for the issuance of a writ of execution, which was granted by the trial court on February 7, 1996.
- Petitioner subsequently moved to quash the writ execution on two different grounds:
- On May 24, 1996, he contended that the penalty clause (2% monthly interest and 25% attorney’s fees) was not applicable since his default was due to the lessee’s fault (the representative lacked a special power of attorney).
- On February 20, 1997, he alleged fraudulent conduct by claiming that his former counsel, Atty. Leonardo Cruz, had fraudulently attached an unapproved page containing the penalty clause into the compromise agreement.
- The lessee refuted the fraud allegation by presenting Atty. Leonardo Cruz’s testimony that:
- The petitioner had, in fact, consented to the inclusion of the penalty clause.
- The compromise agreement approved by the court was signed by the petitioner inside the courtroom before submission.
- The trial court, on October 26, 1998, denied the petitioner’s motion to quash the writ execution and modify the judgment, giving credence to the lessee’s evidence and noting that the petitioner had ample opportunity to object to the penalty clause earlier but failed to do so.
- On appeal, the Court of Appeals affirmed the trial court’s decision, leading to the present petition for review.
Issues:
- Whether the petitioner is bound by the penalty clause imposing 2% monthly interest and 25% attorney’s fees contained in the compromise agreement approved by the trial court.
- Did the petitioner’s alleged lack of consent or claim of fraud regarding the penalty clause hold merit?
- Is the petitioner estopped from contesting the penalty clause due to his conduct before and after the approval of the compromise agreement?
- The propriety of imposing the penalty clause:
- Whether the inclusion of the penalty clause was valid and properly incorporated into the judicial compromise agreement.
- The effect of the petitioner’s failure to timely raise the issue of fraud or non-consent on the enforceability of the penalty clause.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)