573 Phil. 416
REYES, R.T., J.:
The LESSEE has the option to renew his leasehold interest in the leased premises for an additional ten (10) years at the expiration of the term of his lease under such terms and conditions as may be agreed upon by the parties provided that the LESSEE shall give the LESSOR, prior to the expiration of the term of this Lease, 180 days notice, in writing, of his desire to procure such new Lease.[4]On December 4, 2001, Marman manifested to PPI its intention to renew the lease contracts.[5] Two months later, Marman communicated to PPI its proposed terms for the renewal of the lease.[6] PPI replied with a counter offer which included, among others, lessening the period of the lease and increase in the variable fee, escalation rate and minimum required volume per year.[7]
WHEREFORE, defendant's motion to dismiss the case on the grounds cited as affirmative defenses in its Answer is denied for lack of merit. Summary judgment is hereby rendered in favor of plaintiff Marman Trading and against defendant Planters Products, Inc. as follows:In granting specific performance, the RTC ratiocinated:All counterclaims are hereby DISMISSED for lack of merit.
- Ordering defendant to honor and recognize that the lease contracts had been renewed for another ten (10) years from their original expiration, and ordering defendant to execute the written contract of renewal of the lease contracts for another ten (10) years from their expiration, the rental rate to be determined by applying the agreed escalation rate of 7.75% to the rental rate last paid by plaintiff;
- Ordering defendant to pay plaintiff exemplary damages in the amount of P200,000.00;
- Ordering defendant to pay plaintiff attorney's fees and cost of litigation in the amount of P200,000.00.
SO ORDERED.[17]
While defendant correctly pointed out that a renewal provision, even if construed for the benefit of one party, cannot be unilateral in the sense that there still has to be a mutual agreement between the parties. Yet, it is equally true that the contract cannot be renewed on the mere whim of the plaintiff since there has to be a mutual agreement as to the terms and conditions of the renewal. However, it should be noted that the provision had already specified a period of time for the renewal, particularly ten years. To follow defendant's line of thinking would be to disregard completely a contractual agreement between the parties. Clearly, the term of the renewal had already been pre-agreed upon, and can no longer be the subject of further negotiation. Moreover, this Court finds that the cases of Heirs of Dalisay v. Court of Appeals (201 SCRA 751) and Fernandez v. Court of Appeals (166 SCRA 577) cited by defendant are not directly applicable to the instant case since the antecedent facts therein are much different from the facts in this case.In denying PPI's counterclaims for non-payment of docket fees, the RTC stated:x x x x Moreover, this Court has the legal duty to uphold and enforce to the letter the contractual obligations of the parties, absent any showing that such obligations are contrary to laws, morals, good customs and public policy. More so where the terms being insisted on by defendant would make it impossible for plaintiff to recover its investments. Plaintiff correctly pointed out that "the imposition of unreasonable terms and exorbitant terms is equivalent to an outright rejection of plaintiff's right to seek the renewal of the lease contracts. This is tantamount to negotiating in bad faith." The case of Tuason v. Del Asis (107 Phil. 131) establishes the power of this Court to determine whether the terms demanded by a lessor are exorbitant and to determine what is a reasonable rent given the circumstances.
Using such discretion, this Court finds that plaintiff is entitled to the renewal of the lease contracts under the commercial terms mutually agreed upon for an additional period of ten years, counted from the time of the expiration of the original contracts. First of all, the length of the term is already stated in the lease contracts, thus can no longer be altered by one party without the consent of the other. The terms of the renewal provisions cannot be disregarded - ten years is ten years no matter how you look at it. Thus, the intent of the parties when the contracts were perfected should stand. Furthermore, this Court finds that the shortening of the term despite the increased rental rates and minimum volume constitutes unreasonable and exorbitant terms that would leave one party unable to recoup its investments while leaving the other party unjustly enriched at the expense of plaintiff. This Court cannot permit such an injustice to take place.[18]
As regards the affirmative defenses raised by the defendants as grounds for a motion to dismiss, after much consideration this Court finds the same bereft of merit. While it is true that the failure to pay the docket fees would be reasonable cause to have the complaint expunged from the records, this court finds no defect in the amount of docket fees paid by plaintiff. The Manchester case cited by defendant clearly states that all complaints should "specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer." However, despite reading plaintiff's third alternative cause of action several times over, this Court finds no indication that plaintiff ever directly sought or prayed for the market value of the improvements from defendant. The fact that plaintiff stated in its complaint the alleged market value of the improvements does not necessarily mean that it is praying for the compensation of such amount, more so when it is clearly stated that what is sought is merely a declaration of ownership. Besides, the claim is only an alternative cause of action and does not have any bearing on the resolution of the main complaint.Marman moved for partial reconsideration[20] but its motion was denied.[21] PPI appealed to the CA.
Anent the contention that the complaint fails to state a cause of action since there is no showing that plaintiff is entitled to the renewal of the lease contracts, suffice it to say that this Court has already found, through summary judgment, plaintiff to be entitled to the renewal of the lease contracts. This Court has already given its reasons for finding that plaintiff had a valid cause of action for specific performance against defendant. Thus, the ground raised by defendant is evidently bereft of any legal basis at this point.[19]
WHEREFORE, the appeal is PARTIALLY GRANTED. The Order dated June 11, 2004 of the Regional Trial Court of Makati City, Branch 150 is hereby AFFIRMED with the MODIFICATION that the complaint filed by Conchita Tan, doing business under the name Marman Trading is hereby DISMISSED.The CA reversed the RTC order compelling PPI to execute written contracts of renewal of lease. The appellate court reasoned that mere acceptance by Marman of the commercial terms of the counter offer of PPI (i.e., rents, variable fee and minimum escalation volume) did not result in the perfection of new lease contracts absent agreement on other terms of the counter offer, thus:
SO ORDERED.[23]
As We see it, as far the provisions granting an option to renew are concerned, the only term on which there has been a clear agreement is the period of the renewed contract, i.e., ten (10) years. The provisions are silent as to the other terms and conditions as these were still subject to agreement by both PPI and Marman.The CA however affirmed the RTC dismissal of PPI's counterclaim for non payment of docket fee, thus:
Under Article 1318 of the Civil Code, there is no contract unless there is consent of the contracting parties. Article 1319 of the same Code further states that "consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract." Thus, as a general rule, if the parties come to an agreement on the essential points of a contract, that is, on the object and the cause, there is already perfection even if there are other points that have yet to be agreed upon or have been reserved for future agreement.
This being the case, should the acceptance by Marman of the economic conditions proposed by PPI, a renewed contract of lease had already been perfected as the other terms and conditions that have yet to be agreed upon were "irrelevant to the instant case." We disagree.
In A. Magsaysay, Inc. vs. Cebu Portland Cement Co., the Supreme Court laid down an exception to the general rule that an agreement on the essential points of a contract already amounts to perfection. Thus:While Article 1319 of the New Civil Code prescribes that `consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract,' this rule does not apply to a situation like the one before us, wherein one or both parties consider that other matters or details, in addition to the subject matter and consideration, should be stipulated and agreed upon. In that case, the area of agreement must extend to all points that the parties deem material or there is no contract.In the present case, the intention of both PPI and Marman is clearly to have an agreement on all the points being discussed before there can be a renewal. This is evident from Marman's letter to PPI dated November 8, 2002 wherein it was explicitly stated that both parties had agreed that there must be a concurrence on all the points being discussed in the negotiations, including the points that the trial court found irrelevant, before there can be a renewal, x x x.[24] (Citations omitted)
Civil law commentator Arturo M. Tolentino has a similar opinion.
If the intention of one or both parties is that there be concurrence on all points, the contract is not perfected if there is a point of disagreement, even if there is already agreement on the essential elements of the contract. x x x.
If there is no declaration that agreement on an accessory or subordinate matter is necessary, the contract will be perfected as soon as there is concurrence on the object and the cause. The regulation of the accessory points will then be determined by future agreement, and, if there is no agreement thereon, by the general rules established by law for the particular case in the absence of agreement, such as the place of performance, expenses for the delivery of the thing, etc.
A counterclaim is either compulsory or permissive in nature.Marman sought partial reconsideration[26] of the CA decision but it was denied.[27] Hence, this petition before Us.
A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.
As to permissive counterclaims, in Valencia vs. Court of Appeals, the Supreme Court stated certain criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined, summarized as follows:Tested against these standards, We agree with the trial court that PPI's counterclaim is clearly permissive. The issues of fact and law alone between Marman's complaint and PPI's counterclaim are completely different. This being the case, the trial court was correct in dismissing PPI's counterclaim for PPI's failure to pay the prescribed docket fees. It is settled that it is not only the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fees, that vests the court with jurisdiction over the subject matter of the action. The same rule applies to permissive counterclaims.
- Are the issues of fact and law raised by the claim and counterclaim largely the same?
- Would res judicata bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule?
- Will substantially the same evidence support or refute plaintiff's claim as well as defendant's counterclaim?
- Is there any logical relation between the claim and the counterclaim?
Nonetheless, PPI claims that its counterclaim cannot be dismissed in the absence of a motion to dismiss being filed by Marman. We disagree. As the trial court never acquired jurisdiction over the permissive counterclaim filed by PPI, under Section 1, Rule 9 of the Rules of Civil Procedure, the same may be dismissed motu proprio or even without a motion to dismiss having been filed by Marman.
Respecting the issues concerning whether the complaint filed by Marman stated a cause of action and whether Marman paid the prescribed filing fees, We find that these issues had been rendered moot and academic in the light of the foregoing disquisition.[25] (Citations omitted)
I.
THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR OF LAW WHEN IT FAILED TO DISMISS THE APPEAL OUTRIGHT FOR NOT BEING FILED IN ACCORDANCE WITH THE RULES OF COURT.
II.
THE COURT OF APPEALS COMMITTED GRIEVIOUS (SIC) REVERSIBLE ERROR OF LAW WHEN IT RULED THAT THE PARTIES HAD NOT YET AGREED ON THE SUBSTANTIAL PORTIONS OF THE RENEWAL OF THE LEASE CONTRACTS.III.
THE COURT OF APPEALS COMMITTED GRIEVOUS REVERSIBLE ERROR OF LAW WHEN IT DISMISSED THE COMPLAINT FILED BY MARMAN WITH THE RTC.
Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflect this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter even that which this Court itself has already declared to be final x x x.In this case, We find that the procedural lapse committed is only minor and even negligible. It involves a mere formal defect of failure to cite the page reference of the original records of the case in PPI's appellant brief. The defect is not even jurisdictional, such as failure to pay docket fee or failure to appeal within the reglementary period. Marman did not suffer any damage from the procedural lapse. The CA correctly exercised its sound discretion in proceeding to rule on the merits of the appeal rather than dismissing it on a mere formal defect.
The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities. Time and again, this Court has consistently held that rules must not be applied rigidly so as not to override substantial justice.[33]
The LESSEE has the option to renew his leasehold interest in the leased premises for an additional ten (10) years at the expiration of the term of his lease under such terms and conditions as may be agreed upon by the parties provided that the LESSEE shall give the LESSOR, prior to the expiration of the term of the term of this Lease, 180 days notice, in writing, of his desire to procure such new Lease.The renewal of the original lease is subject to "terms and conditions as may be agreed upon by the parties." The stipulation is couched in general and mutual terms. It is clear that the renewal of the lease is not automatic. The parties will still negotiate and bargain on the terms and conditions of the new contract. These terms and conditions are not specified. Thus, they may include commercial terms, such as rent and escalation clause, as well as non-commercial terms such as covenants to fix and repair the leased premises. The only term that cannot be negotiated or bargained under the new contract is the period of renewal of the lease which is fixed in the original lease at ten years. All other terms and conditions are subject to negotiation.
Planters Products, Inc.The letter of Marman to PPI is clear. The new contract of lease is perfected only upon agreement of all terms and conditions of the new contract, including the relocation of the sulfuric and ammonia pipelines and the repair of the middle dock facilities. The parties failed to reach any agreement on all terms and conditions of the new lease contract. Hence, no new lease was perfected as between them.
Planters Products Building
109 Esteban Street
Legaspi Village, MakatiAttention: Mr. Llewellyn F. FortunaVP Finance and Treasurer
Re: Matters discussed in the meeting on October 21, 2002
Dear Mr. Fortuna:
In connection with subject matter, we would like to confirm the outstanding items which we discussed in our meeting last October 21, 2002, to wit:1) With regard to the relocation of ammonia bullet tank and Marman Trading's office which are both located near the proposed area to be leased out to PPI's new locator, we prefer that both the tank and office not be relocated since it will totally disrupt our operations. More specifically, it is quite difficult to cut the tank into several pieces for relocation. Thus, if possible, both tank and office should be left in their present locations. If this is not possible, the new lessee should be made to shoulder any relocation costs.
x x x x
6) The proposed relocation of both sulfuric acid and ammonia pipelines will be done only after the renewal of the lease contracts.
7) We are going to address the issue of the repair and rehabilitation of the middle-dock facilities. We have already referred to you two (2) independent underwater surveyors/contractors who are willing to undertake the repairs.
8) We are already amenable to your proposed escalation rates and minimum volumes.
9) Upon reaching mutual agreement on all the foregoing terms and conditions, you agree to renew the Lease Contracts for an additional period of ten (10) years as mentioned and provided under our existing Lease Contracts.[36] (Emphasis supplied)
x x x While Article 1319 of the new Civil Code prescribes that "consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract," this rule does not apply to a situation where one or both parties consider that the matters or details, in addition to the subject matter and the consideration, should be stipulated and agreed upon. The area of agreement must extend to all points that the parties deem material or there is no contract. x x x[38]In the recent case of Leonardo v. Court of Appeals,[39] this Court reiterated:
The essence of consent is the agreement of the parties on the terms of the contract, the acceptance by one of the offer made by the other. It is the concurrence of the minds of the parties on the object and the cause which constitutes the contract. The area of agreement must extend to all points that the parties deem material or there is no consent at all.[40] (Emphasis supplied)WHEREFORE, the appealed Decision is AFFIRMED IN FULL.