G.R. No. 205652 - Procter and Gamble Asia Pte. Ltd. vs. Commissioner of Internal Revenue

Campo Assets Corporation (Petitioner) is involved in a dispute with Club X.O. Company (Respondent), which is represented by Chan York Gui (Allan).
The underlying controversy stems from contractual arrangements governing the use and operation of a food and entertainment business establishment located at the corner of Roxas Boulevard and San Luis Street, Pasay City.

A Memorandum of Agreement was executed on January 5, 1991, between Alma Arambulo’s husband and Campo Assets, who had a lease contract with the owner of the premises.
The purpose of the agreement was to enable Arambulo to operate her business establishment under certain fixed monetary conditions.
On August 3, 1993, Arambulo renewed the Memorandum of Agreement to continue operating the business—then known as "Hand-in-Hand Disco"—with a guaranteed monthly income of P88,000 payable on or before the 15th of each month, pursuant to the terms set in line with the lease between Campo Assets and the premises’ owner.

Around June 1994, Arambulo entered into a partnership with Chan York Gui (Allan) to jointly manage the business, which was renamed Club X.O. Disco Theater.
The partnership was formally registered with the Securities and Exchange Commission as Club X.O. Company, under which notable improvements were made to the premises.

On January 13, 1996 (or thereabout), Campo Assets took possession of the premises, claiming that Arambulo had deserted or abandoned the property.
The re-taking was justified by Campo Assets pursuant to Paragraph VI of the Memorandum of Agreement, which stated:

“In case the premises shall be deserted or vacated before the expiration of this Agreement, the FIRST PARTY shall have the right to enter the same as the agent of the SECOND PARTY either by force or otherwise, without being liable to any prosecution thereof, and the FIRST PARTY shall furthermore have the option to retake and operate the business itself or relet the same as agent of the SECOND PARTY to receive guaranteed P88,000.00 monthly income therefrom, and to apply the same to the payment of the guaranteed income due hereunder holding the SECOND PARTY liable for any deficieny, without prejudice to any right of action against the SECOND PARTY.”

On April 1, 1996, Club X.O. Company instituted a complaint for forcible entry in the Metropolitan Trial Court, Pasay City (Civil Case No. 256-96), seeking recovery of possession and damages against Campo Assets.
The trial court dismissed the complaint for lack of merit, finding that:

There was no privity of contract between Club X.O. and Campo Assets regarding the Memorandum of Agreement.
Arambulo’s failure to pay the guaranteed income amounted to a breach of the agreement, constituting an abandonment of the premises.
Campo Assets’ act of taking possession was in strict compliance with Paragraph VI of the agreement, which was upheld as a valid resolutory condition.

The decision of the Metropolitan Trial Court was affirmed in toto by the Regional Trial Court.
Upon petition for review, the Court of Appeals reversed the decisions, holding that:

Club X.O.’s prior possession of the property provided a valid cause of action for forcible entry regardless of title.
Paragraph VI of the Memorandum of Agreement was declared void for being against public order because it permitted re-entry by force without judicial process.

The factual finding that the premises were abandoned by Arambulo supported its takeover.
Since the property was effectively abandoned, the use of force was not only justified but did not incur criminal liability.

It was in complete possession of the premises since it had taken over the active management of the business pursuant to the partnership agreement with Arambulo.
Campo Assets’ use of security guards to retake possession was a violation, amounting to forcible entry, irrespective of any contractual stipulations.

The decision referenced precedents such as Viray vs. Intermediate Appellate Courts that upheld similar stipulations in lease contracts as valid but with limitations (notably not authorizing unqualified force).
The case also noted that while American law sometimes supports the use of “all necessary force” in re-entry upon lease expiration, such provisions must not contravene public order or be applied to situations where the leased property is still in possession of a party.
Additional cited cases (e.g., Consing vs. Jamandre, Zulueta vs. Mariano) highlight that any provision allowing forceful re-entry without the proper judicial process could lead to taking the law into one’s own hands, a dangerous eventuality contrary to the remedy and the maintenance of peace.

Whether Paragraph VI of the Memorandum of Agreement, which permits re-entry and possession by force in case of abandonment, is void for being against public order.
Whether such a clause contravenes the general principle that parties must resort to legal processes rather than taking the law into their own hands.

Whether Campo Assets’ act of taking possession of the premises was justified under the contractual clause, given the alleged abandonment by Arambulo.
Whether Club X.O. can successfully claim a cause of action for forcible entry based primarily on its prior possession, despite not being a party to the lease or related contracts.

Whether the abandonment of the premises by Arambulo effectively terminates her rights under the Memorandum of Agreement and thereby validates the lessor’s (Campo Assets) subsequent actions.
Whether Club X.O.'s allegation that the premises were not abandoned is substantiated enough to override the contractual findings and the factual determination by the lower courts.