G.R. No. 158676 - BPI-Family Savings Bank, Inc. vs. Spouses Domingo

Julian Cruz is the owner of a commercial lot and building at No. 977 E. Quirino Ave., Novaliches, Quezon City.
BPI-Family Savings Bank (BPI-FSB) entered into a lease agreement with Cruz, and later, after its acquisition of FSB by the Bank of the Philippine Islands (BPI), renewed the lease contract.
Benjamin Villa, a former Vice President of BPI-FSB, became involved as a sublessee, and later as a seller of the goodwill of his restaurant business.

The original lease and a subsequent new lease agreement between Cruz and BPI-FSB both contained a stipulation allowing the lessee to sublease the premises while prohibiting any assignment or transfer of its lease rights without the lessor’s written consent.
On February 23, 1989, while the original lease was still in effect, BPI-FSB subleased the premises to Benjamin Villa without securing written consent from Cruz, although Cruz did not object, effectively acquiescing to the sublease.

Villa operated the “Carousel Food House” on the premises, but his restaurant business failed to prosper, leading him to consider closing the business.
Around June 4, 1990, Villa entered into negotiations with Mrs. Zenaida Domingo, who expressed interest in taking over the restaurant business.
Villa explained that as a sublessee he was not permitted to assign his rights and indicated the need to rescind his sublease with BPI-FSB to enable a direct sublease agreement between BPI-FSB and the Domingo spouses.

Villa informed BPI-FSB of the arrangement, and the bank consented.
A partial payment of P300,000.00 was received from Mrs. Zenaida Domingo on June 15, 1990, with Villa issuing a receipt acknowledging the payment for relinquishing his rights.
On June 18, 1990, BPI-FSB executed a new sublease contract in favor of the Domingos.
On June 21, 1990, a Deed of Rescission of Villa’s sublease agreement with BPI-FSB was executed.

On June 26, 1990, Villa received the balance of P350,000.00 from the Domingos, culminating in a total transaction amount of P650,000.00.
Villa promptly vacated and turned over the key to the Domingos after issuing the corresponding receipt for the full payment.
However, on June 27, 1990, when the Domingos attempted to clean and take possession of the premises, they were prevented entry because the door was padlocked and a notice was posted indicating that the premises were not for lease or sublease.
Evidence indicates that Julian Cruz, the lessor, preempted the Domingos’ access by padlocking the premises, thereby thwarting efforts by both Villa and BPI-FSB to deliver possession.

The Domingos filed a suit in the RTC of Quezon City for the recovery of P650,000.00 along with damages based on the failure of Villa and BPI-FSB to deliver possession as assured.
Villa and BPI-FSB countered by filing third-party complaints against Cruz, alleging that his actions (padlocking and posting prohibitory notices) barred the fulfillment of their obligations.
The RTC ruled in favor of the Domingos, ordering Villa and BPI-FSB to pay actual, moral, and exemplary damages, as well as attorney’s fees, while also directing Cruz to reimburse the amounts paid by Villa and BPI-FSB.
On common and separate appeals (consolidated as CA-G.R. CV No. 60994), the Court of Appeals (CA) affirmed the RTC decision and denied the motions for reconsideration by the parties.

BPI-FSB contended that it should not be held solidarily liable with Villa for the refund of P650,000.00 paid by the Domingos, arguing that its obligation did not arise from the transaction between Villa and the Domingos.
BPI-FSB argued that, as a sublessor, it lacked privity regarding Villa’s separate transaction with the Domingos and invoked provisions of Articles 1207 and 1311 of the Civil Code.
Villa similarly argued that he should not share liability with BPI-FSB since the contract executed with the Domingos was solely between him and the Domingos, discounting his prior sublease agreement with BPI-FSB.

Whether BPI-FSB can be held solidarily liable with Benjamin Villa for the return of the P650,000.00 paid by the Domingos, notwithstanding its claim of non-participation in Villa’s separate transaction with the Domingos.

Determining if the solidary liability arises from the intertwined nature of the sublease contracts and the obligation to deliver possession to the Domingos.
Assessing the applicability of Articles 1207 and 1311 of the Civil Code in excluding BPI-FSB’s liability.

Whether the sublease agreement executed by BPI-FSB with the Domingos should be characterized as a sublease or an assignment of rights.

Clarifying if the absence of a transfer of the entire lease interest (assignment) exempts BPI-FSB from the responsibility of placing the Domingos in possession.
Evaluating the implications of the contractual clause regarding assignment versus sublease, especially considering the rescission of the initial sublease with Villa.

Whether the actions of Julian Cruz in padlocking the premises and posting a “not for lease or sublease” notice absolve or mitigate the liability of BPI-FSB and Villa.

Examining if Cruz’s intervention constitutes a breach on his part under the lease agreement and whether this should lead to reimbursement obligations.