Case Summary (G.R. No. 128690)
Key Dates
· August 16, 2000: Lease commencement for five years at P60,000 (Year 1), P66,000 (Year 2), P72,600 (Years 3–5)
· October 4, 2001: Comglasco notifies Santos of pre-termination effective December 1, 2001
· January 15, 2002: Comglasco vacates premises and ceases rental payments
· October 20, 2003: Santos files breach-of-contract suit
· January 21, 2004: Summons and complaint served; Comglasco moves to dismiss for improper service
· August 18, 2004: RTC renders judgment on the pleadings in favor of Santos
· August 10, 2011: Court of Appeals affirms RTC judgment with modifications
· March 25, 2015: Supreme Court decision denying petition for review
Applicable Law
· 1987 Philippine Constitution (decision date post-1990)
· Civil Code of the Philippines: Articles 1266–1267 (doctrine of unforeseeable events), Article 2208(2) (attorney’s fees)
· Rules of Court: Rule 34, Section 1 (Judgment on the Pleadings); Rule 35, Section 2 (Summary Judgment)
Lease Agreement and Pre-Termination Clause
The parties’ written lease provided for a five-year term with specific rent escalations. Paragraph 15 allowed the lessee to pre-terminate “with cause” during the first three years and “without cause” thereafter. Comglasco invoked “business reverses” purportedly due to the 1997 Asian financial crisis as a cause to terminate in Year 2. Santos rejected the pre-termination, insisting on full performance.
Facts and Procedural History
Comglasco vacated the premises on January 15, 2002, and ignored successive demand letters. Santos filed suit on October 20, 2003. After service of summons, the RTC denied Comglasco’s motion to dismiss for improper service. Comglasco filed an answer but failed to dispute material allegations. Santos moved for judgment on the pleadings, which the RTC granted on August 18, 2004, awarding unpaid rent (January 16, 2002 to August 15, 2003: ₱1,333,200), interest, attorney’s fees (₱200,000), litigation expenses (₱50,000), exemplary damages (₱400,000), and costs. Execution pending appeal was likewise authorized.
Court of Appeals Ruling
The CA affirmed the RTC’s judgment on August 10, 2011, but reduced attorney’s fees to ₱100,000 and deleted litigation expenses and exemplary damages. The CA agreed that Comglasco admitted the lease’s validity and non-performance, justifying judgment on the pleadings.
Issues Raised Before the Supreme Court
- Proper invocation of judgment on the pleadings
- Whether Comglasco’s answer raised material issues requiring evidence
- Appropriateness of summary judgment or judgment on the pleadings
- Credit for advance rentals and security deposit (₱309,000)
- Legal basis for attorney’s fees without stipulation
Judgment on the Pleadings vs. Summary Judgment
Under Rule 34, Section 1, a court may render judgment on the pleadings when no genuine issue of fact exists. The Supreme Court held that Comglasco’s answer admitted all material allegations: existence and terms of the lease, pre-termination attempt, vacation of premises, and failure to pay. Consequently, no factual controversy remained. Comglasco had the alternative remedy of a Rule 35 summary judgment motion with supporting evidence but did not pursue it.
Application of Article 1267 (Doctrine of Unforeseen Events)
Comglasco’s reliance on Article 1267, which applies to prestations rendered “manifestly beyond the contemplation of the parties,” was rejected. The Court distinguished lease rentals (a “to give” obligation) from obligations involving services to which the doctrine ordinarily applies. Citing Philippine National Construction Corp. v. CA, the Court reaffirmed that mere financial difficulty or known business risks do not excuse performance. Because Comglasco entered the lease in 2000—three years after the 1997 crisis—and with full knowledge of market conditions, no “absolutely exceptional” change wa
...continue readingCase Syllabus (G.R. No. 128690)
Facts
- On August 16, 2000, Santos Car Check Center Corporation leased a showroom at 75 Delgado Street, Iloilo City, to Comglasco Corporation for five years.
- Agreed monthly rents: ₱60,000 in Year 1, ₱66,000 in Year 2, and ₱72,600 in Years 3–5.
- On October 4, 2001, Comglasco sent a letter notifying Santos of pre-termination effective December 1, 2001.
- Santos rejected pre-termination, pointing to the five-year term.
- Comglasco vacated the premises on January 15, 2002, and ceased rental payments.
- Santos issued multiple demand letters (final demand on September 15, 2003); Comglasco ignored all.
Procedural History
- October 20, 2003: Santos filed a breach-of-contract suit in RTC, Iloilo City, Branch 37.
- January 21, 2004: Summons and complaint served; Comglasco moved to dismiss for improper service.
- RTC denied dismissal and ordered re-service; Comglasco filed Answer on June 28, 2004.
- Santos moved for judgment on the pleadings; RTC granted and, on August 18, 2004, awarded:
• ₱1,333,200.00 unpaid rentals (Jan 16, 2002–Aug 15, 2003) plus 12% interest
• ₱200,000 attorney’s fees, ₱50,000 litigation expenses, ₱400,000 exemplary damages
• Costs of suit - February 14, 2005: Santos moved for execution pending appeal; granted May 12, 2005.
- August 10, 2011: Court of Appeals affirmed RTC decision, reduced attorney’s fees to ₱100,000, deleted litigation expenses and exemplary damages.
- Comglasco filed petition for review with the Supreme Court.
Issues Presented
- Whether RTC properly granted judgment on the pleadings.
- Whether Comglasco’s Answer raised material issues.
- Whether summary judgment or judgment on the pleadings was the proper remedy.
- Whether Comglasco’s advance rental deposit (₱309,000) should be credited.
- Wh