Title
Manufacturers Building, Inc. vs. Court of Appeals
Case
G.R. No. 116847
Decision Date
Mar 16, 2001
PMMS leased spaces, defaulted on rent, entered a compromise, breached it, mortgaged properties, faced auction, and lost appeals over rental disputes and damages.
eviction
delinquent tenants
damages

Case Summary (G.R. No. 116847)

Factual Background

The Philippine Merchant Marine School leased three portions of the Manufacturers Building in 1979 and 1980: the fifth floor, Room No. 406, and part of the basement, at monthly rents originally stated in the record. Respondents became delinquent in payment. Manufacturers Building, Inc. sued for ejectment in the Metropolitan Trial Court and, on May 7, 1984, the parties executed a written compromise which the court approved on May 21, 1984. The compromise recited admitted indebtedness in the aggregate of approximately P510,200 as of June 1984 and fixed new monthly rentals and an installment plan for arrears. Respondents subsequently failed to comply with the compromise.

Subsequent Transactions and Execution

After July 1984 the monthly rentals were increased in accordance with the compromise terms. Manufacturers Building, Inc. obtained a writ of execution, delayed enforcement at times because of respondents’ promises, and later sought and obtained alias writs. On January 23, 1986 respondents executed a deed of second real estate mortgage in favor of petitioner to secure the payment of P823,494.50 within six months with legal interest of 12% per annum. The sheriff levied on two parcels of land (TCT Nos. S-100612 and S-100613) on August 22, 1986. Respondents vacated the leased premises on October 30, 1986; petitioner claimed repairs to two units totaling P112,020.00 and P39,500.00 and included those amounts in the account. Petitioner demanded payment in September 1987, instructed the sheriff to proceed in November 1989, and the sheriff set a public auction for December 29, 1989.

Trial Court Proceedings

Respondents sought injunctive relief in the Regional Trial Court to enjoin the auction. The trial court found that the deed of second mortgage specified legal interest of 12% per annum and therefore the proper monthly charge was 1% per month and not 2.5% per month as alleged by petitioner. The court computed the arrearages using the rentals fixed in the compromise and found the amount due to be P1,520,065.75 computed to December 31, 1990. The trial court dismissed the petition for injunction and authorized the sheriff to proceed with public auction to satisfy that sum. The court also denied petitioner’s claim for damages for repairs for lack of adequate proof. A motion for reconsideration filed by petitioner was denied.

Court of Appeals Ruling

On appeal the Court of Appeals affirmed the trial court in toto. The appellate court held that the parties were bound by the written compromise and that extrinsic evidence could not be admitted to vary its terms under the parol evidence rule. The court declined petitioner’s attempt to prove a different monthly rental and a different interest stipulation by parol evidence. The appellate court further denied the claim for damages because petitioner failed to present sufficient proof of actual damage. Finally, the court concluded that the auction sale of the levied real property was authorized by the compromise agreement.

Issues Presented to the Supreme Court

Manufacturers Building, Inc. presented three principal grounds in its petition for review: first, that the Court of Appeals erred in applying the parol evidence rule in computing the monthly rental and thereby excluding evidence of an alleged change in rental rates; second, that the appellate court wrongly applied legal interest of 12% per annum instead of the parties’ alleged subsequent stipulation of 2.5% per month; and third, that the appellate court erred in denying petitioner’s claim for damages for repair and rehabilitation of the leased premises.

Parties’ Contentions

Petitioner argued that the written compromise did not preclude proof of an agreement to increase the monthly rentals and to stipulate higher interest on arrears, and that the trial court misapplied the interest provision so as to understate the indebtedness; petitioner also asserted entitlement to damages for repairs. Respondents maintained that the parties were bound by the written compromise and that payment of certain arrears had been effected by the sale of personal property; respondents relied on the compromise and the deed of second mortgage which expressly stipulated interest at 12% per annum. The trial court and the Court of Appeals accepted respondents’ position.

Ruling of the Supreme Court

The Supreme Court denied the petition for lack of merit and affirmed the decision of the Court of Appeals in CA-G.R. CV No. 32312. The Court concluded that the factual findings of the trial court, as adopted and affirmed by the Court of Appeals, were final and conclusive and that none of the recognized exceptions permitting review of factual findings obtained in the case. The Court therefore upheld the application of the parol evidence rule, the trial court’s interest computation based on 12% per annum, and the denial of damages for lack of competent proof. The judgment below was thus affirmed. Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concurred.

Legal Basis and Reasoning

The Court reiterated that where parties reduced their agreement to a written instrument they were bound by its terms and could not introduce parol evidence to contradict or vary those terms. The Court noted the limited exceptions to the parol evidence rule — for intrinsic ambiguity, mistake or imperfection in the writing; failure of the writing to express the true intent of the pa

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms