A.C. No. 6297 - Parinas vs. Paguinto

In 1994, Victor C. Cua (“Cua”) entered into four 20-year prepaid lease contracts with Gotesco Properties, Inc. (“Gotesco”) for commercial units in Ever-Gotesco Commonwealth Center, used for two jewelry stores and two amusement centers.
The contracts provided monthly rent plus common area and air-conditioning dues (CAAD) at P2.00 per sqm per day for common areas and P2.25 per sqm per day for aircon, or a gross P4.25 per sqm per day, payable on or before the 5th of each month.

Clause 17 of the leases stipulated that CAAD shall bear an annual compounded escalation of 18% effective 1995 or at a rate determined by the lessor if CAAD proved insufficient to meet inflation, peso devaluation, and other utility and maintenance cost increases.
From January 1997 to 2003, Gotesco unilaterally imposed escalation charges totaling P2,269,735.64.

Cua protested the escalation charges by letters in February and March 2001; Gotesco insisted on their validity.
On March 3, 2003, Cua filed a Complaint for Injunctive Relief, Restitution, and Damages with application for a TRO and writ of preliminary injunction. The TRO and injunction were initially granted, later dissolved, and the presiding judge was disqualified, leading to raffling of the case to RTC Branch 41.

On August 3, 2012, RTC Branch 41 held the escalation clause void for violating the principle of mutuality, ordered Gotesco to cease collecting disputed CAAD and to return P2,269,735.64 with 6% interest per annum, and awarded Cua P500,000 attorney’s fees.
Gotesco’s motion for reconsideration was denied on January 9, 2013; it filed a timely appeal.

On March 29, 2016, the CA interpreted the clause as valid only for an 18% rate and invalid for any other rate; it affirmed return of P2,269,735.64, subject to recomputation at 18%, remanded for that purpose, and deleted the attorney’s fees award.
The CA denied motions for reconsideration on November 29, 2016.

Gotesco filed G.R. No. 228513 and Cua filed G.R. No. 228552; both petitions for review on certiorari were consolidated by order dated June 7, 2017.

Does the second paragraph of Clause 17 violate the principle of mutuality by granting Gotesco an unbridled, unilateral right to set or change CAAD escalation rates?
Is the imposition of escalation charges without proving inflation, peso devaluation, or increased costs legally sustainable?

May Cua recover attorney’s fees under Civil Code Article 2208 for being compelled to litigate due to Gotesco’s acts?
If recoverable, what is the appropriate amount?