SECOND DIVISION
G.R. No. 220479, August 17, 2016
PASDA, INCORPORATED, Petitioner, v. REYNALDO P. DIMAYACYAC, SR., SUBSTITUTED BY THE HEIRS, REPRESENTED BY ATTY. DEMOSTHENES D. C. DIMAYACYAC, Respondent.
D E C I S I O N
MENDOZA, J.:
This Petition for Review on Certiorari seeks to reverse and set aside the September 8, 2015 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 133647, which affirmed with modification the December 17, 2013 Decision2 of the Regional Trial Court, Branch 215, Quezon City (RTC), upholding the March 12, 2013 Decision3 of the Metropolitan Trial Court, Branch 36, Quezon City (MeTC) in a complaint for Sum of Money.
The Antecedents
In March 1999, petitioner PASDA, Incorporated (PASDA) and respondent Reynaldo P. Dimayacyac, Sr. (Dimayacyac) entered into a Contract of Lease4 of Suite 506 PASDA Mansion in Quezon City with a monthly rental of P17,000.00, plus 10% Value-Added Tax (VAT), and two percent (2%) interest per month in case of default. Dimayacyac, as lessee, was also to pay the utility costs for the said unit. The lease contract also provided that, in case of litigation, Dimayacyac should pay liquidated damages in the sum of P10,000.00 and attorney's fees equivalent to 25% of the amount claimed in the complaint.5chanrobleslaw
On July 16, 2005, Dimayacyac vacated the unit leaving an outstanding arrearage for monthly rentals, 10% VAT, and utility costs, in the aggregate amount of P340,071.00. Pursuant to paragraph 24 of the lease contract, PASDA took possession of Dimayacyac's articles and equipment found in the rented unit and prepared an inventory of the said items. In spite of the lapse of the agreed 30-day period to settle his obligations and the demand letters sent to him, he still failed to pay his outstanding obligation.
On May 11, 2007, PASDA filed a complaint6 for sum of money before the MeTC against Dimayacyac to collect the outstanding obligation in the amount of P340,071.00.
The MeTC Ruling
In its March 12, 2013 Decision, the MeTC found Dimayacyac liable for the amount claimed in PASDA's complaint. It, however, reduced the amount from P340,071.00 to P16,271.00 because it deducted the value of the items confiscated by PASDA, which amounted to P323,800.00. Further, the MeTC reduced the interest rate from 2% per month to 6% per annum and awarded P20,000.00 as attorney's fees. The dispositive portion of the said decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter to pay the former as follows:Unsatisfied with the reduction of the monetary award, PASDA appealed before the RTC.
chanRoblesvirtualLawlibrary1. The amount of Sixteen thousand two hundred seventy-one pesos (P16,271.00), plus interest of six percent (6%) per annum reckoned from September 22, 2006 until the whole obligation is fully paid;
2. The amount of Twenty thousand pesos (P20,000.00) as and for attorney's fees; and cralawlawlibrary
3. To pay the costs of suit.
SO ORDERED.7chanroblesvirtuallawlibrary
WHEREFORE, premises considered, the instant petition is hereby DENIED. The Decision dated December 17, 2013 of the Regional Trial Court, Branch 215, Quezon City is hereby AFFIRMED with MODIFICATION in that respondents Reynaldo P. Dimayacyac, Sr., substituted by his heirs, represented by Atty. Demosthenes D.C. Dimayacyac, are ordered to pay petitioner PASDA, Incorporated the amount of P16,271.00 plus legal interest of six percent (6%) per annum from September 22, 2006 until fully paid; P10,000.00 as liquidated damages; and P20,000.00 as attorney's fees. Moreover, from the finality of this Decision until full satisfaction, the total amount due shall likewise earn another interest at six percent (6%) per annum until fully satisfied.In the course of the proceedings before the CA, Dimayacyac died and he was substituted by his heirs as respondents.
SO ORDERED.9chanroblesvirtuallawlibrary
PASDA asserts that the value of the items it had retained should not have been deducted from Dimayacyac's unpaid obligation, claiming that, under paragraph 24, not paragraph 23, of the lease contract, it merely had the right, and not the obligation, to sell the items in case of the lessee's default and apply the proceeds thereof to the remaining balance. PASDA explains that it decided to file the present action after it was unable to sell the said articles. It insists that it did not appropriate Dimayacyac's properties for itself and merely retained them until they could be sold under execution of a final judgment in this case.ISSUES I
WHETHER THE COURT OF APPEALS GRIEVOUSLY ERRED IN ITS INTERPRETATION OF THE PROVISIONS OF PARAGRAPH 24 OF THE CONTRACT OF LEASE THAT THE VALUES OF THE ARTICLES OF DIMAYACYAC WHICH WERE RETAINED BY (NOT FORFEITED TO) THE PETITIONER SHOULD BE DEDUCTED FROM THE UNPAID RENTAL ACCOUNTABILITIES OF DIMAYACYAC;II
WHETHER THE COURT OF APPEALS GRIEVOUSLY ERRED IN ITS APPRECIATION OF THE EVIDENCE ON THE VALUATION OF THE SAID RETAINED (NOT FORFEITED) ARTICLES BY GIVING DUE WEIGHT AND CREDENCE TO THE BARE AND SELF-SERVING VALUATION WHICH HAVE NOT BEEN SUPPORTED BY ANY EVIDENCE;III
WHETHER THE COURT OF APPEALS ERRED IN REDUCING THE AMOUNT OF THE ATTORNEY'S FEES CONTRARY TO THE EXPRESS STIPULATION IN THE CONTRACT OF LEASE; ANDIV
WHETHER THE COURT OF APPEALS ERRED IN REDUCING THE STIPULATED RATE OF INTEREST TO BE IMPOSED ON THE UNPAID ACCOUNTABILITIES OF DIMAYACYAC TO ONLY SIX PER CENT (6%) CONTRARY TO THE EXPRESS STIPULATION IN THE CONTRACT OF LEASE.10chanroblesvirtuallawlibrary
The cardinal rule in the interpretation of contracts is embodied in the first paragraph of Article 1370 of the Civil Code: "[i]f the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control." This provision is akin to the "plain meaning rule" applied by Pennsylvania courts, which assumes that the intent of the parties to an instrument is "embodied in the writing itself, and when the words are clear and unambiguous the intent is to be discovered only from the express language of the agreement". x x x A court's purpose in examining a contract is to interpret the intent of the contracting parties, as objectively manifested by them. The process of interpreting a contract requires the court to make a preliminary inquiry as to whether the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations. Where the written terms of the contract are not ambiguous and can only be read one way, the court will interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the interpretation of the contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence.In other words, the courts must first determine whether there is ambiguity in a particular provision of a contract and the absence of which leaves the courts to read the provision on its face as it was written and treat it as the binding law of the parties to the contract.23 Thus, a perusal of the lease contract in this case is in order for the determination of the propriety of the application of the value of the retained items to Dimayacyac's total liabilities. PASDA correctly pointed out that while the CA cited paragraph 23 in its decision, paragraph 24 was the one that pertained to non-payment of rentals and the particular provision to be interpreted. The said portion reads:ChanRoblesVirtualawlibrary
x x x x
The agreement or contract between the parties is the formal expression of the parties' rights, duties and obligations. It is the best evidence of the intention of the parties. x x x Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as it is not contrary to law, morals, good customs or public policy. Otherwise, courts would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties or amend the latter's agreement, for to do so would be to alter the real intention of the contracting parties when the contrary function of courts is to give force and effect to the intention of the parties.22 [Emphases supplied]
This Contract shall be considered automatically terminated and cancelled should the LESSEE violate any of the provisions of this Contract or fail to pay rentals due thereon within the time herein provided or where the premises are abandoned by LESSEE as herein above state; in any of such cases, the LESSOR is hereby given the right without need of formal notice or demand to enter into and take possession of the leased premises and to exercise its right of ownership, as well as the LESSOR'S rights as provided for in this Contract of Lease;Paragraph 24 is clear and unequivocal. Hence, it must be applied according to its literal and express terms and not in a manner which would expand or run contrary to it. Literally applying the provisions of the present contract, PASDA merely had the right or authority to sell the articles ih the leased premises and apply the proceeds thereof to Dimayacyac's liabilities. It neither mandated PASDA to sell the same nor authorized it to appropriate them and offset their value against the outstanding liabilities of Dimayacyac. PASDA was even bound to return to Dimayacyac any excess from the private sale.
Furthermore, when any or all of the above circumstances occur, the LESSE hereby constitutes and appoints the LESSOR as his duly authorized attorney-in-fact with the power and authority to cause the premises to be opened in the presence of any peace officer, to take inventories of all LESSEE'S merchandise, effects, and/or equipment therein and to remove and transfer the same to the LESSOR'S bodega. LESSEE hereby expressly agrees to pay for all responsible expenses incurred by the LESSOR in connection therewith, including storage fees, which expenses and fees in addition to back rentals or any other liabilities of the LESSEE to the LESSOR, if any, shall be first and preferential lien on said LESSEE'S merchandise, effects, and equipment; Provided, furthermore, that failure of the LESSEE to clear any such merchandise, effects, and equipment within thirty (30) days from date of closure and abandonment of the premises as herein provided shall give rise to the LESSOR'S right to dispose of the same in a private sale and to apply the proceeds thereof first to the back rentals, next to expenses incurred by the LESSOR for transfer storage and private sale to the other liabilities of LESSEE to LESSOR and the excess if any, shall be given to the LESSEE; LESSOR shall not incur any civil and/or criminal liabilities whatsoever by exercising its rights granted under these provisions. The rights granted to the LESSOR in this section may be exercised by the LESSOR'S duly authorized employees, agents or representatives and in so doing shall not incur civil and/or criminal liabilities whatsoever.24 [Emphasis supplied]
Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract, but such freedom is not absolute. As Article 1306 of the Civil Code provides, "The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy." Hence, if the stipulations in the contract are valid, the parties thereto are bound to comply with them, since such contract is the law between the parties. x x xNevertheless, the Court is of the considered view that the stipulated attorney's fees can be equitably reduced under the circumstances. As the attorney's fees were not integral to the rentals but merely incidental to its collection, and it was intended as a penal clause to answer for liquidated damages,29 decreasing the rate equitably balances the rights and interests of both parties. The Court also takes into account that in the lease contract, the attorney's fees would already serve as penalty for the default of the lessee, and the payment of liquidated damages in the amount of P10,000.00 was also provided.
x x x x
Clearly, jurisprudence establish that the 24% p.a. stipulated interest rate was not considered unconscionable, thus, the 23% p.a. interest rate imposed on petitioners' loan in this case can by no means be considered excessive or unconscionable.28 [Emphasis supplied]
When the action is for recovery of money arising from contract, express or implied, and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person.The said provision should be read in consonance with Section 5, Rule 86 of the Rules of Court, which reads:ChanRoblesVirtualawlibrary
All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants. Where an executor or administrator commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead of present them independently to the court as herein provided, and mutual claims may be set off against each other in such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall be considered the true balance against the estate, as though the claim had been presented directly before the court in the administration proceedings. Claims not yet due, or contingent, may be approved at their present value.From the foregoing provisions of the Rules of Court, it is clear tr at in the event that the respondent-debtor dies during the pendency of the ase, the same is not dismissed but is allowed to continue. If, eventually, the court rules against the deceased respondent, the same shall be enforced as a claim against his estate, and not against the individual heirs. In Genato v. Bayhon,30 the Court wrote that the remedy of a creditor in case of the death of the debtor is to enforce the former's claim against the latter's estate, to wit:ChanRoblesVirtualawlibrary
The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied. x x xThe fact that Dimayacyac's heirs have not instituted any action for the settlement of his estate does not warrant the conclusion that the judgment award must be enforced against the individual heirs.
The procedure in vindicating monetary claims involving a defendant who dies before final judgment is governed by Rule 3, Section 20 of the Rules of Civil Procedure, to wit:ChanRoblesVirtualawlibraryWhen the action is for recovery of money arising from contract, express or implied, and the defendant dies before entry of final judgment in the court in which the action was pending at the time of such death, it shall not be dismissed but shall instead be allowed to continue until entry of final judgment. A favorable judgment obtained by the plaintiff therein shall be enforced in the manner especially provided in these Rules for prosecuting claims against the estate of a deceased person.Pursuant to this provision, petitioner's remedy lies in filing a claim against the estate of the deceased respondent.31 [Emphases supplied]
Endnotes:
1 Penned by Associate Justice Ramon R. Garcia with Associate Justice Leoncia R. Dimagiba and Associate Justice Zenaida T. Galapate-Laguilles, concurring; rollo, pp. 183-194.
2 Penned by Acting Presiding Judge Wilfredo L. Maynigo; id. at 89-94.
3 Penned by Presiding Judge Edgardo B. Bellosillo; id. at 67-71.
4 Id. at 32-35.
5 Id. at 9-10.
6 Id. at 28-31.
7 Id. at 71.
8 588 Phil. 748 (2008).
9Rollo, pp. 190-191.
10 Id. at 16.
11 Id. at 209-224.
12 Id. at 232-235.
13 Id. at 240-242.
14 Id. at 228-230.
15 Id. at 243-249.
16 Id. at 250.
17Yap v. Chua, 687 Phil. 392, 399 (2012).
18 Id. at 399-400.
19Morla v. Belmonta, 678 Phil. 102, 117 (2011), citing Roxas v. Zuzvaregui, Jr., 516 Phil. 605 (2006).
20 Article 1370 of the Civil Code.
21 620 Phil. 381 (2009), citing Benguet Corporation v. Cabildo, 585 Phil. 23 (2009).
22 Id. at 388.
23The Wellex Group, Inc. v. U-Land Airlines, Co., Ltd., G.R. No. 167519, January 14, 2015, 745 SCRA 563, 601-602.
24Rollo, p. 34.
25cralawred Id. at 47-48.
26 Id. at 20.
27 710 Phil. 490 (2013).
28 Id. at 497-499.
29RGM Industries Inc. v. United Pacific Capital Corporation, 689 Phil. 660 (2012).
30 613 Phil. 318 (2009).
31 Id. at 327.