G.R. No. 171707 - Spouses Amoncio vs. Benedicto

Case Summary (G.R. No. 171707)

Factual Background

Petitioners owned a 600 sq. m. parcel in Quezon City and executed a lease with Ernesto Garcia covering 120 sq. m. and, subsequently, a lease with respondent covering 240 sq. m. The respondent’s written lease stipulated a five-year term renewable annually up to five years, required payment of three months advance and three months deposit totalling P115,200, and contained provisions on improvements and exclusive use for a construction supply business. Garcia and respondent took possession in December 1997. Garcia pre-terminated his lease in July 1999. Petitioners allege that respondent stopped paying rent in December 1999, occupied Garcia’s portion after Garcia left, and constructed improvements on an additional 120 sq. m. that was not leased to him.

Procedural History

Petitioners demanded arrears and cessation of construction and rescinded the lease on January 27, 2000. They filed an action for recovery of possession in the RTC of Quezon City on June 23, 2000, seeking arrears from December 1999 to vacatur, rent for Garcia’s portion after August 1999, rent for the unleased 120 sq. m., and rent for the unexpired lease until August 2002. Respondent answered and counterclaimed for P600,000 for construction of two buildings assigned to petitioners, P300,000 as adjusted cost for his portion, and P10,000 as attorney’s fees. The RTC dismissed petitioners’ complaint and granted respondent’s counterclaim. The Court of Appeals in CA-G.R. CV No. 79341 affirmed. Petitioners filed a motion for reconsideration which the CA denied, and they invoked certiorari under Rule 45 to the Supreme Court.

Issues Presented

The dispositive issues were whether petitioners consented to respondent’s construction of commercial buildings on the leased property; whether the parol evidence rule barred respondent’s testimony of an oral agreement outside the written lease; whether petitioners could recover rental arrears, rent for the unexpired lease term, and rent for portions allegedly occupied by respondent but not covered by his lease; and whether respondent was entitled to recover construction costs under his counterclaim or was a builder in bad faith.

Parties’ Contentions

Petitioners maintained that no agreement existed for respondent to construct the buildings, that the written lease embodied the entire agreement rendering parol evidence inadmissible, that they were entitled to rentals for arrears and for the unexpired lease period, and that respondent was a builder in bad faith who should not recover construction costs. Respondent asserted that he and petitioner Wilfredo Amoncio orally agreed to construct five commercial buildings, that he financed the project and was to receive two units while petitioners would reimburse him for two units, that he paid rents and advanced deposits, and that he was entitled to P600,000 for two buildings that went to petitioners, P300,000 as adjusted cost, and P10,000 attorney’s fees.

Trial Court Ruling

The RTC credited respondent’s evidence of the oral agreement and the construction. It found that petitioners had acquiesced and that respondent undertook construction at an agreed cost of P300,000 per unit. The RTC dismissed petitioners’ complaint for lack of factual and legal basis and awarded respondent P600,000, P300,000, and P10,000 as prayed in his counterclaim.

Court of Appeals Ruling

The Court of Appeals affirmed the RTC. It held that petitioners failed to prove respondent occupied portions not covered by his lease. It also concluded that petitioners could not insist on payment for the unexpired lease because they had demanded that respondent vacate. Finally, the CA ruled that the parol evidence rule was not available to petitioners because they failed to object to respondent’s testimony in the trial court and thus waived the rule.

Standard of Review on Factual Findings

The Supreme Court noted the limitation under Rule 45 that it ordinarily does not disturb findings of fact by lower courts unless the findings ignored salient points affecting the outcome or otherwise fell within established exceptions. The Court found no basis to overturn the factual findings of the RTC and the CA.

Supreme Court’s Findings on Consent and Estoppel

The Supreme Court found substantial record support that petitioners, and specifically petitioner Wilfredo Amoncio, acquiesced to the construction. The record showed that Wilfredo Amoncio secured the building permit and required approval of design specifications. The Court invoked the doctrine of estoppel, observing that petitioners assumed inconsistent positions by denying knowledge of the construction after having accepted benefits and participating in the permitting process.

Application of the Parol Evidence Rule

The Court recited Rule 130, Section 9, Rules of Court, and summarized its exceptions: intrinsic ambiguity, failure to express true intent, invalidity, and subsequent agreements. The Court observed that although the rule precludes proof of terms outside a written agreement, it is not absolute and admits proof of separate oral agreements that are not inconsistent with the written terms or where the circumstances show the written instrument does not embody the entire transaction. In this case, the Court concluded that circumstances evidenced other agreements and that petitioners failed to timely object to respondent’s testimony; thus petitioners waived the protection of the parol evidence rule.

Ruling on Petitioners’ Rent Claims

The Supreme Cou

Case Syllabus (G.R. No. 171707)

Parties and Procedural Posture

SPOUSES WILFREDO AND ANGELA AMONCIO filed an appeal by certiorari under Rule 45 from the decision of the Court of Appeals in CA-G.R. CV No. 79341.
AARON GO BENEDICTO was the respondent-defendant in the underlying action for recovery of possession of real property and was plaintiff in a counterclaim in the Regional Trial Court, Branch 82, Quezon City.
The RTC dismissed petitioners' complaint and granted respondent's counterclaim, and the Court of Appeals affirmed the RTC decision.
Petitioners' motion for reconsideration in the Court of Appeals was denied by resolution dated February 22, 2006.
The Supreme Court reviewed the case on appeal and issued the present decision affirming the Court of Appeals.

Key Factual Allegations

Petitioners leased portions of their 600 sq. m. lot first to Ernesto Garcia for 120 sq. m. and later to respondent for 240 sq. m. under written lease contracts.
The lease to respondent stipulated a monthly rental of Nineteen Thousand Two Hundred Pesos (P19,200.00), a five-year term renewable annually to a maximum of five years, and an upfront payment equivalent to three months deposit and three months advance rental totaling One Hundred Fifteen Thousand Two Hundred Pesos (P115,200.00).
Respondent took possession in December 1997, allegedly stopped paying rent in December 1999, and vacated his leased portion on June 8, 2000.
Petitioners rescinded the lease on January 27, 2000, and later filed for recovery of possession and rents; they also alleged occupation by respondent of a 120 sq. m. portion not leased to him.
Respondent counterclaimed, asserting an oral agreement to construct five commercial buildings costing P300,000.00 each, financing the project himself, and claiming payment of P600,000.00 for two buildings awarded to petitioners, P300,000.00 as adjusted cost, and P10,000.00 attorney's fees.

Contract Terms

The written lease specified the leased area, monthly rental, term of lease, requirement of postdated checks for succeeding rentals, liability for remaining rentals in case of failure to complete the term, and that improvements would become the lessor's property after expiration.
The written lease required design specifications to obtain lessor approval and imposed that taxes on structural improvements be for the lessee's account.
The contract on its face contained no express provision for construction by respondent of buildings to be apportioned among the parties.

Trial Court Findings

The RTC found for respondent on credibility and factual grounds and dismissed petitioners' complaint for lack of factual and legal basis.
The RTC granted respondent's counterclaim and ordered petitioners to pay P600,000.00 for two improvements constructed on petitioners' lot, P300,000.00 representing adjusted cost for two other improvements, and P10,000.00 as attorney's fees.
The RTC relied on respondent's testimony, the building permit signed by petitioner Wilfredo Amoncio, and the conduct of petitioners in accepting benefits from the construction.

Court of Appeals Ruling

The Court of Appeals affirmed the RTC and held that petitioners failed to prove occupation of non-leased portions by respondent.
The Court of Appeals ruled that petitioners could not insist on rent for the unexpired lease period after they demanded respondent vacate the premises.
The Court of Appeals found that the