G.R. No. 138088 - Car Cool Philippines, Inc. vs. Ushio Realty and Development Corp.

Case Summary (G.R. No. 138088)

Factual Background

CAR COOL PHILIPPINES, INC. occupied a parcel of land at No. 72 (137) Quezon Avenue, corner Victory Avenue, Quezon City, under lease from Spouses Hector and Gloria Hizon Lopez since 1972. The parties executed a written lease in 1990 for two years. After its expiration, the Spouses Lopez allowed continued occupation for monthly rentals, culminating in a verbal month-to-month tenancy that continued until 31 August 1995. On 15 June 1995, Hector Lopez informed CAR COOL of his intention to sell and offered CAR COOL the option to buy; CAR COOL did not accept. Hector Lopez purportedly terminated the verbal lease on 28 June 1995 and reiterated demands to vacate on 22 July, 1 August, and 12 August 1995. An Absolute Deed of Sale dated 14 September 1995 and a Transfer Certificate of Title issued 19 September 1995 show that USHIO REALTY purchased the property from the Spouses Lopez. USHIO REALTY thereafter demanded that CAR COOL vacate, issued a final demand on 3 December 1995, and filed a complaint for ejectment on 19 December 1995 when CAR COOL refused to surrender possession. CAR COOL countered that on 20 January 1995 Hector Lopez agreed to renew the lease for two years at P18,000 monthly and that CAR COOL advanced payments and an additional security deposit to Lopez covering 1995 and 1996; CAR COOL also alleged forcible entry and destruction of improvements by agents of USHIO REALTY on 1 October 1995 and filed criminal complaints and an action for specific performance and damages against Lopez and USHIO REALTY.

Trial Court Proceedings

The Metropolitan Trial Court of Quezon City found for USHIO REALTY and rendered judgment on 19 June 1996 ordering CAR COOL and persons claiming under it to surrender possession, ordering CAR COOL to pay P18,000 per month as reasonable compensation beginning October 1995 until final vacation, and awarding P20,000 as attorney’s fees plus costs. The Regional Trial Court affirmed on 28 October 1996. The Court of Appeals affirmed with modification on 13 August 1998 in CA-G.R. SP No. 43134, holding that the obligation to pay P18,000 monthly should run from 19 December 1995 until final vacation. CAR COOL filed a motion for reconsideration on 15 September 1998, which the Court of Appeals denied in a resolution dated 10 March 1999. CAR COOL then sought relief in the Supreme Court under Rule 45.

The Parties' Contentions

CAR COOL contended that the award of rentals and attorney’s fees in favor of USHIO REALTY constituted unjust enrichment because CAR COOL allegedly suffered destruction of its office, equipment, and spare parts by USHIO REALTY’s agents on 1 October 1995, rendering continuation of business impossible and eliminating any benefit to USHIO REALTY. CAR COOL further asserted that it had paid in advance rentals and a security deposit to Hector Lopez and that Lopez had promised to execute a written lease. USHIO REALTY maintained that it was the lawful owner of the property by deed of sale and TCT and therefore entitled to possession and reasonable compensation for CAR COOL’s continued occupation after demand.

Issue Presented

Whether the Court of Appeals erred in awarding damages by way of rentals and attorney’s fees in favor of USHIO REALTY.

Ruling of the Supreme Court

The Court found the petition partly meritorious. It affirmed the decision of the Court of Appeals dated 13 August 1998 and its resolution dated 10 March 1999 with modification. The Court held that USHIO REALTY was entitled to reasonable compensation of P18,000 per month for CAR COOL’s use and occupation of the property from 19 December 1995 until 18 November 1996, aggregating P198,000. The Court ordered this amount to earn six percent per annum interest from 19 November 1996 until finality of the decision, after which the accrued interest together with the P198,000 shall earn twelve percent per annum until full payment. The Court deleted the award of attorney’s fees and imposed costs against the petitioner.

Legal Basis and Reasoning

The Court relied on Rule 70, Sections 17 and 19, Rules of Civil Procedure, which authorizes judgment for restitution of the premises and “the sum justly due as arrears of rent or as reasonable compensation for the use and occupation of the premises,” together with attorney’s fees and costs where appropriate. The Court observed undisputed proof of USHIO REALTY’s ownership by deed of sale and Transfer Certificate of Title and emphasized the owner’s right to physical possession. The Court agreed with the Court of Appeals that CAR COOL’s possession became unlawful upon receipt of the demand to vacate and CAR COOL’s refusal on 19 December 1995. The Court rejected the unjust enrichment argument, applying Article 22 of the Civil Code and the doctrinal definition of unjust enrichment, and holding that there is no unjust enrichment when the person who benefits has a valid legal claim; USHIO REALTY had such a claim under Rule 70. The Court cited Benitez v. Court of Appeals for the proposition that damages in ejectment are limited to rent or fair market value for the use and occupation of the property. The trial courts’ assessment of P18,000 per month was sustained as reasonably certain because it reflected the latest monthly rental paid to the previous owner. The Court fixed the rental period from 19 December 1995 until the sheriff delivered possession to USHIO REALTY on 18 November 1996, yielding P18,000 times eleven months equaling P198,000. Interest was applied consistent with Article 2213 of the Civil Code and controlling jurisprudence: six percent per annum from 19 November 1996 until finality, and twelve perce

Case Syllabus (G.R. No. 138088)

Parties and Posture

CAR COOL PHILIPPINES, INC. was the defendant in the ejectment action and the petitioner before the Supreme Court.
USHIO REALTY AND DEVELOPMENT CORPORATION was the plaintiff in the ejectment action and the respondent before the Supreme Court.
The petition sought review under Rule 45 of the 1997 Rules of Civil Procedure of the Decision dated 13 August 1998 and the Resolution dated 10 March 1999 of the Court of Appeals in CA‑G.R. SP No. 43134.
The Court of Appeals had affirmed the trial court with the modification that monthly rental payments of P18,000 should run from 19 December 1995 until CAR COOL vacated the premises.

Key Facts

CAR COOL had occupied the subject property since 1972 and executed a written two‑year lease with Spouses Hector and Gloria Hizon Lopez in 1990.
The written lease expired in 1992 and CAR COOL remained on the premises under a verbal month‑to‑month tenancy until 31 August 1995.
On 15 June 1995, Hector Lopez informed CAR COOL of his intention to sell the property and gave CAR COOL a right of first refusal which CAR COOL did not exercise.
Hector Lopez purportedly terminated the verbal tenancy on 28 June 1995 and repeatedly demanded vacation in letters dated 22 July, 1 August, and 12 August 1995.
An Absolute Deed of Sale dated 14 September 1995 showed that the Spouses Lopez sold the property to USHIO Realty, and the Registry of Deeds issued a Transfer Certificate of Title in favor of USHIO Realty on 19 September 1995.
CAR COOL alleged that on 20 January 1995 Hector Lopez orally agreed to renew the lease for two years at P18,000 per month and that CAR COOL paid substantial advance rentals and an additional security deposit to Lopez.
CAR COOL alleged that USHIO Realty knew of the alleged renewal and on 1 October 1995 unlawfully entered, demolished improvements, and assaulted employees, prompting criminal complaints filed on 9 October 1995 and amended for grave coercion.
CAR COOL filed a complaint for specific performance and damages against Hector Lopez and USHIO Realty on 21 November 1995 seeking to compel execution of a written lease for 1995–1996.
USHIO Realty sent a final demand on 3 December 1995 giving CAR COOL fifteen nonextendible days to vacate, and filed the ejectment complaint on 19 December 1995 when CAR COOL refused to vacate.

Procedural History

The Metropolitan Trial Court rendered judgment for USHIO Realty on 19 June 1996 ordering restitution of the premises and P18,000 per month as reasonable compensation starting October 1995, plus attorney’s fees and costs.
The Regional Trial Court affirmed the Metropolitan Trial Court decision on 28 October 1996.
The Court of Appeals affirmed with modification on 13 August 1998 by ordering monthly rent of P18,000 to run fro