Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&amp;view=article&amp;id=50164:gr-172384-2007&amp;catid=1496&amp;Itemid=566
Timestamp: 2019-04-18 18:53:10+00:00

Document:
G.R. No. 172384 - Erminda F. Florentino v. Superv Alue Inc.
ERMINDA F. FLORENTINO, Petitioner, v. SUPERVALUE, INC., Respondent.
Considering that petitioner already committed several breaches of contract, the respondent thus opted not to renew its Contracts of Lease with her anymore. The security deposits were made in order to ensure faithful compliance with the terms of their lease agreements; and since petitioner committed several infractions thereof, respondent was justified in forfeiting the security deposits in the latter's favor.
WHEREFORE, premises duly considered, judgment is hereby rendered ordering the [herein respondent] to pay [herein petitioner] the amount of P192,000.00 representing the security deposits made by the [petitioner] and P50,000.00 as and for attorney's fees.
The [respondent] is likewise ordered to return to the [petitioner] the various properties seized by the former after settling her account with the [respondent].
Lastly, the [respondent] may choose either to reimburse the [petitioner] one half (1/2) of the value of the improvements introduced by the plaintiff at SM Megamall should [respondent] choose to appropriate the improvements to itself or require the [petitioner] to remove the improvements, even though the principal thing may suffer damage thereby. [Petitioner] shall not, however, cause anymore impairment upon the said leased premises than is necessary.
The other damages claimed by the plaintiff are denied for lack of merit.
Aggrieved, the respondent appealed the adverse RTC Judgment to the Court of Appeals.
In a Decision23 dated 10 October 2003, the Court of Appeals modified the RTC Judgment and found that the respondent was justified in forfeiting the security deposits and was not liable to reimburse the petitioner for the value of the improvements introduced in the leased premises and to pay for attorney's fees. In modifying the findings of the lower court, the appellate court declared that in view of the breaches of contract committed by the petitioner, the respondent is justified in forfeiting the security deposits. Moreover, since the petitioner did not obtain the consent of the respondent before she introduced improvements on the SM Megamall store space, the respondent has therefore no obligation to reimburse the petitioner for the amount expended in connection with the said improvements.24 The Court of Appeals, however, maintained the order of the trial court for respondent to return to petitioner her properties after she has settled her obligations to the respondent. The appellate court denied petitioner's Motion for Reconsideration in a Resolution25 dated 19 April 2006.
I. Whether or not the respondent is liable to return the security deposits to the petitions.
II. Whether or not the respondent is liable to reimburse the petitioner for the sum of the improvements she introduced in the leased premises.
Section 5. DEPOSIT. The LESSEE shall make a cash deposit in the sum of SIXTY THOUSAND PESOS (P60,000.00) equivalent to three (3) months rent as security for the full and faithful performance to each and every term, provision, covenant and condition of this lease and not as a pre-payment of rent. If at any time during the term of this lease the rent is increased[,] the LESSEE on demand shall make an additional deposit equal to the increase in rent. The LESSOR shall not be required to keep the deposit separate from its general funds and the deposit shall not be entitled to interest. The deposit shall remain intact during the entire term and shall not be applied as payment for any monetary obligations of the LESSEE under this contract. If the LESSEE shall faithfully perform every provision of this lease[,] the deposit shall be refunded to the LESSEE upon the expiration of this Lease and upon satisfaction of all monetary obligation to the LESSOR.
Since it was already established by the trial court that the petitioner was guilty of committing several breaches of contract, the Court of Appeals decreed that she cannot therefore rightfully demand the return of the security deposits for the same are deemed forfeited by reason of evident contractual violations.
It is undisputed that the above-quoted provision found in all Contracts of Lease is in the nature of a penal clause to ensure petitioner's faithful compliance with the terms and conditions of the said contracts.
In the instant case, the forfeiture of the entire amount of the security deposits in the sum of P192,000.00 was excessive and unconscionable considering that the gravity of the breaches committed by the petitioner is not of such degree that the respondent was unduly prejudiced thereby. It is but equitable therefore to reduce the penalty of the petitioner to 50% of the total amount of security deposits.
It is in the exercise of its sound discretion that this court tempered the penalty for the breaches committed by the petitioner to 50% of the amount of the security deposits. The forfeiture of the entire sum of P192,000.00 is clearly a usurious and iniquitous penalty for the transgressions committed by the petitioner. The respondent is therefore under the obligation to return the 50% of P192,000.00 to the petitioner.
Section 11. ALTERATIONS, ADDITIONS, IMPROVEMENTS, ETC. The LESSEE shall not make any alterations, additions, or improvements without the prior written consent of LESSOR; and all alterations, additions or improvements made on the leased premises, except movable or fixtures put in at LESSEE's expense and which are removable, without defacing the buildings or damaging its floorings, shall become LESSOR's property without compensation/reimbursement but the LESSOR reserves the right to require the removal of the said alterations, additions or improvements upon expiration of the lease.
The foregoing provision in the Contract of Lease mandates that before the petitioner can introduce any improvement on the leased premises, she should first obtain respondent's consent. In the case at bar, it was not shown that petitioner previously secured the consent of the respondent before she made the improvements on the leased space in SM Megamall. It was not even alleged by the petitioner that she obtained such consent or she at least attempted to secure the same. On the other hand, the petitioner asserted that respondent allegedly misrepresented to her that it would renew the terms of the contracts from time to time after their expirations, and that the petitioner was so induced thereby that she expended the sum of P200,000.00 for the improvement of the store space leased.
The Court ruled that the stipulation of the parties in their lease contract "to be renewable" at the option of both parties stresses that the faculty to renew was given not to the lessee alone nor to the lessor by himself but to the two simultaneously; hence, both must agree to renew if a new contract is to come about.
Moreover, it is consonant with human experience that lessees, before occupying the leased premises, especially store spaces located inside malls and big commercial establishments, would renovate the place and introduce improvements thereon according to the needs and nature of their business and in harmony with their trademark designs as part of their marketing ploy to attract customers. Certainly, no inducement or misrepresentation from the lessor is necessary for this purpose, for it is not only a matter of necessity that a lessee should re-design its place of business but a business strategy as well.
Art. 546. Necessary expenses shall be refunded to every possessor; but only possessor in good faith may retain the thing until he has been reimbursed therefor.
Being mere lessees, the private respondents knew that their occupation of the premises would continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith.
In a plethora of cases, this Court has held that Article 448 of the Civil Code, in relation to Article 546 of the same Code, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where one's only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property.
Since petitioner's interest in the store space is merely that of the lessee under the lease contract, she cannot therefore be considered a builder in good faith. Consequently, respondent may appropriate the improvements introduced on the leased premises without any obligation to reimburse the petitioner for the sum expended.
In the instant petition, it was not shown that the respondent unjustifiably refused to grant the demands of the petitioner so as to compel the latter to initiate legal action to enforce her right. As we have found herein, there is basis for respondent's refusal to return to petitioner the security deposits and to reimburse the costs of the improvements in the leased premises. The award of attorney's fees is therefore not proper in the instant case.
WHEREFORE, premises considered, the instant Petition is PARTLY GRANTED. The Court of Appeals Decision dated 10 October 2003 in CA-G.R. CV No. 73853 is hereby AFFIRMED with the MODIFICATION that the respondent may forfeit only 50% of the total amount of the security deposits in the sum of P192,000.00, and must return the remaining 50% to the petitioner. No costs.
1 Penned by Associate Justice Elvi John S. Asuncion with Associate Justices Godardo A. Jacinto and Lucas P. Bersamin, concurring. Rollo, pp. 8-17.
29 Filinvest Land, Inc. v. Court of Appeals, G.R. No. 138980, 20 September 2005, 470 SCRA 260, 269.
30 Ligutan v. Court of Appeals, 427 Phil. 42, 51 (2002).
31 Filinvest Land, Inc. v. Court of Appeals, supra note 29 at 269-270.
32 Supra note 30 at 52.
33 G.R. No. L-80231, 18 October 1988, 166 SCRA 577, 587-588.
34 Josefa v. San Buenaventura, G.R. No. 163429, 3 March 2006, 484 SCRA 49, 60.
35 Lopez v. Sarabia, G.R. No. 140357, 24 September 2004, 439 SCRA 35, 49.
36 328 Phil. 682, 689-690 (1996).
37 Philippine Air Lines, Inc. v. Court of Appeals, 193 Phil. 560, 580 (1981).

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