CASE FACTS
The spouses Manzanilla are the owners of a 25,000-square meter parcel of land in
Batangas, a portion of which was being leased to Waterfields (represented by its
President AlizaMa).The Contract of Lease (dated May 24, 1994)provides a 25-year
period and renewable upon the option of the lessee. Theres a provision
acknowledging the lessees payment of a rental deposit amounting to P216,000
which is meant to answer for unpaid rentals, damages, penalties and unpaid utility
charges. Such deposit or any balance thereof shall be refunded to the lessee
immediately upon the termination or expiration of the contract. The parties executed
on June 6, 1994 an Amendment to the Contract of Lease which retained the terms
and conditions of the original contract.
Beginning April 1997, however, Waterfields failed to pay the monthly rental. Hence,
Ma sent the spouses Manzanilla a letter dated July 7, 1997. The letter contains Mas
promise to pay the rentals in arrears by way of check payment and a statement that
the deposit stipulated in the lease contract be used exclusively for the payment of the
unpaid utilities and other incidental expenses. It also stated that the original contract
shall be amended according to the provision of the letter.
Spouses Manzanilla filed before the MTC a Complaint for Ejectment against
Waterfields. Paragraph 5 of the complaint alleges: subsequently, the said Contract of
Lease was amended on 06 June 1994 and on 09 July 1997 x xx.
SPOUSES
MANZANILLA
In its Answer, Waterfields admitted paragraphs 4 and 5 of the Complaint. It alleged
that it had built substantial improvements over the land; that it just recently suffered
V. business losses. It claimed that it did not fail or refuse to pay the monthly rentals but
was just utilizing the rental deposit in the amount of P216,000.00 (equivalent to one
year rentals) as rental payment in accordance with Section 4 of the original Contract
of Lease. Hence, it argued that the spouses Manzanilla have no cause of action
WATERFIELDS
INDUSTRIES against it.
CORP.
July 18, 2014 MTC: Ruled in favor of Manzanilla. It held that Mas letter of July 9, 1997 had
amended the Contract of Lease. In particular, Section 4 of the Contract of Lease
which provides that the rental deposit shall answer for any unpaid rentals,
damages, penalties and unpaid utility charges was superseded by the portion in Mas
July 9, 1997 letter which states that the deposit stipulated in our lease contract shall
be used exclusively for the payment of unpaid utilities, if any, and other
incidental expenses only and applied at the termination of the lease. Hence, the
MTC found no merit in Waterfields claim that it did not fail or refuse to pay the
monthly rentals as it was applying the rental deposit to its payment of the same.
RTC: Waterfields, in its Answer admitted paragraph 5 of the Complaint which states
that the Contract of Lease was amended on June 6, 1994 andJuly 9, 1997.
CA: Spouses Manzanilla have no cause of action against Waterfields. Spouses
Manzanilla terminated the Contract of Lease. Upon such termination, it held that the
rental deposit should have been applied as payment for unpaid utilities and other
incidental expenses, if any, in view of the July 9, 1997 letter. And since the spouses
Manzanilla did not allege that there were unpaid utilities or incidental expenses for
the account of Waterfields as of the termination of the contract, the whole amount of
P216,000.00 should have been returned by the former to the latter when the contract
was terminated. Not having done so, the spouses Manzanilla therefore, became
debtors of Waterfields insofar as the said amount is concerned. And since
Waterfields is also a debtor of the spouses Manzanilla with respect to the unpaid
rentals, compensation should take place.
ISSUES RULING
Spouses Manzanilla, on account of Waterfields alleged violation of the contract of lease by non-payment of rentals, considered the contract
terminated and demanded for the latter to pay its obligation and vacate the property. As demand proved futile, the said spouses filed the Complaint
for ejectment [unlawful detainer].
There is no issue with respect to demand. What is in question is the presence of a cause of action. As mentioned above, courts, in order to ascertain
whether there is cause of action for unlawful detainer, must inquire into (a) the existence of the lease contract and, (b) the violation of that lease by
the lessee. Since in this case the existence of a lease contract between the parties is undisputed, the focus is on the supposed violation of the
lease, that is, Waterfields alleged non-payment of rent. However, since Waterfields denies that it failed to pay rent and puts up the claim that it was
utilizing the rental deposit as rental payment, a preliminary question emerges, viz: May the rental deposit be utilized as rental payment?
The violation of the lease through non-payment of rent is what constitutes the cause of action.Hence, once the failure to pay rent is established, a
cause of action for unlawful detainer arises. The CAs acknowledgement that Waterfields failed to pay rent, as shown by its declaration that the latter
is the debtor of the spouses Manzanilla with respect to the unpaid rentals, is clearly inconsistent with the conclusion that no cause of action for
ejectment exists against Waterfields. Failure to pay the rent must precede termination of the contract due to non- payment of rent. It therefore
follows that the cause of action for unlawful detainer in this case must necessarily arise before the termination of the contract and not the other way
around as what the CA supposed. Indeed, in going beyond the termination of the contract, the CA went a bit too far in its resolution of this case.
Whether Waterfields cannot now contradict its judicial admission that the Contract of Lease was amended on July 9, 1997; the doctrine of estoppel likewise
or not bars it from falsifying Mas July 9, 1997 letter in this litigation.
there was
a violation Clearly, Waterfields admitted in its Answer the truth of the material allegation that the Contract of Lease was amended on July 9, 1997. It is well-
of the settled that judicial admissions cannot be contradicted by the admitter who is the party [itself] and binds the person who makes the same, and
absent any showing that this was made thru palpable mistake (as in this case), no amount of rationalization can offset it.
lease
which will Moreover, [u]nder the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied
justify a or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party
complaint who relied upon them. In the law of evidence, whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
for another to believe a particular thing [to be] true, and to act upon such belief, he cannot, in any litigation arising out of such declaration, act, or
omission, be permitted to falsify it.
unlawful
detainer.
In view of these, any effort on the part of Waterfields to impugn the July 9, 1997 letter is futile.
(YES)
Even without the above-mentioned admission of Waterfields, the contemporaneous and subsequent acts (which, according to Article 1371 of the
Civil Code, shall be considered in judging the intent of the contracting parties) of the parties reveal their intention to amend the original Contract of
Lease.
The doctrine of unjust enrichment does not apply in this case since any benefit that the spouses Manzanilla may obtain from the subject premises
cannot be said to be without any valid basis or justification.
For the purpose of bringing an unlawful detainer suit, two requisites must concur: (1) there must be failure to pay rent or comply with the
conditions of the lease, and (2) there must be demand both to pay or to comply and vacate. The first requisite refers to the existence of the
cause of action for unlawful detainer, while the second refers to the jurisdictional requirement of demand in order that said cause of action may
be pursued.
Section 4, Rule 129 of the Rules of Court provides:
SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require
proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.
A party may make judicial admissions in (a) the pleadings, (b) during trial, either by verbal or written manifestations or stipulations, or (c) in other
stages of the judicial proceeding.