Case Summary (G.R. No. 229928)
Facts and Antecedent Proceedings
Makati Water, Inc. entered two Franchise Agreements with Agua Vida Systems, Inc. to operate water refilling stations in Las Piñas City and Makati City. These agreements, effective for five years, included stipulations regarding the repurchase of equipment and non-competition clauses following termination. The parties did not renew the franchises upon expiration. Agua Vida Systems subsequently filed complaints for specific performance and damages when Makati Water operated the stations under its own name post-expiration, potentially violating the agreements.
Court Proceedings
The Regional Trial Court (RTC) denied a motion to dismiss MWI's case, determining the right to repurchase under the Franchise Agreements could not be exercised beyond four years from their execution. The court ruled in favor of AVSI for closure of the stations and awarded compensatory and exemplary damages as well as attorney's fees to AVSI. MWI filed for reconsideration which was denied. Appeals ensued leading to decisions by both RTC Branch 67 and eventually the Court of Appeals (CA).
Ruling and Legal Interpretation
The core issue in the petition revolves around the interpretation of “termination” within Section IV-5 of the Franchise Agreements, specifically whether it encompasses expiration. The Court concluded that “termination,” as described in the agreements, does include expiration, therefore MWI was obliged to cease operations within two years of the franchise's expiration, consistent with AVSI’s protective interest in its brand and goodwill.
Decision on Damages and Legal Basis
The Court affirmed the RTC’s findings regarding compensatory damages, citing evidence from AVSI regarding lost profits stemming from MWI’s continued operations. The amount awarded was substantiated by sales data for the two-year period following expiration. The Court emphasized the lawful entitlement of AVSI to damages due to MWI’s contravention of the prohibition clause.
Conclusion on Attorney’s Fees and Costs
Further, the CA modified the attorney’s fees awarded by
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Background of the Case
- The case involves a Petition for Review on Certiorari filed by Makati Water, Inc. (MWI) against Agua Vida Systems, Inc. (AVSI), concerning the enforcement of Franchise Agreements.
- The proceedings originate from two separate Franchise Agreements executed on November 11, 1996, and December 23, 1996, allowing MWI to operate two water refilling stations under AVSI's brand.
- The agreements had a term of five years, expiring on November 11, 2001, and December 23, 2001, respectively.
- After the expiration of the agreements, MWI continued operations under its own name and did not renew the agreements with AVSI.
Facts and Antecedent Proceedings
- MWI requested an extension of the Franchise Agreements, which AVSI agreed to, but no formal renewal occurred.
- AVSI reminded MWI of the agreements' expiration and demanded cessation of operations and the return of supplied equipment, to which MWI did not comply.
- AVSI filed complaints for Specific Performance and Damages against MWI in November 2002, seeking closure of the refilling stations and compensatory damages for continued operation beyond the termination period.
Lower Court Proceedings
- MWI filed a Motion to Dismiss, which was denied, leading to the consolidation of the two complaints.
- The RTC, Branch 67, ruled on February 28, 2011, denying AVSI's request for equipment repurchase but