Case Digest (G.R. No. 228513)
Facts:
Gotesco Properties, Incorporated v. Victor C. Cua, G.R. No. 228513 and G.R. No. 228552, February 15, 2023, Supreme Court Third Division, Gaerlan, J., writing for the Court.In 1994 Victor C. Cua entered into four 20‑year prepaid lease contracts with Gotesco Properties, Inc. for commercial units in Ever‑Gotesco Commonwealth Center. The leases fixed rent and prescribed monthly common area and aircon dues (CAAD) of P4.25 per square meter per day (P2.00 common area plus P2.25 aircon), and contained an escalation clause stating CAAD “shall bear an annual escalation, compounded, at eighteen percent (18%) effective calendar year 1995 or at a rate to be determined by [the] LESSOR if said dues shall not be sufficient to meet inflation, Peso devaluation, and other escalation in utility and maintenance costs at any point in time.”
Beginning in 1997 Gotesco unilaterally imposed varying CAAD escalation charges, aggregating P2,269,735.64 through 2003. Cua protested by letters in 2001 but Gotesco insisted on the contractual escalation. On March 3, 2003 Cua filed a complaint for injunctive relief, restitution, and damages with application for ex parte TRO and preliminary injunction; a TRO was issued and then extended, and an early writ of preliminary injunction was issued and later dissolved. After a judge was disqualified and the case was re‑raffled, the case was tried on the merits before the Regional Trial Court (RTC) of Manila, Branch 41.
On August 3, 2012 RTC Branch 41 declared the escalation paragraph of Clause 17 invalid for violating the principle of mutuality, ordered Gotesco to cease collecting the escalations and to return P2,269,735.64 with 6% legal interest from January 1997, and awarded P500,000 attorney’s fees. The RTC denied reconsideration on January 9, 2013; Gotesco appealed.
On March 29, 2016 the Court of Appeals (pen. Peralta, with Tijam and Acosta, JJ., concurring) partly granted the appeal: it construed the escalation clause as permitting an 18% rate (valid) but invalidating a separate grant of unfettered power to the lessor to impose a rate in case of inflation; it affirmed restitution but remanded for recomputation using the 18% and deleted the attorney’s fees. Motions for ...(Subscriber-Only)
Issues:
- Is the CAAD escalation clause in paragraph 17 of the lease contracts valid, or does it violate the principle of mutuality of contracts?
- Is Victor C. Cua entitled to attorney’s fees under Article 2208 of t...(Subscriber-Only)
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)