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DECISION
NACHURA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision dated April 18, 2005 and the Resolution
dated August 15, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 65773.
The Facts
On May 25, 1992, petitioner leased from respondents for a period of two (2)
years, from May 8, 1992 to May 8, 1994, the Talisay Tourist Sports Complex,
to be operated as a cockpit. The lease was extended for another four (4)
years, or until May 8, 1998.
Under the Contract of Lease,1 it was stipulated that petitioner shall, like a good
father of the family, maintain in good condition the furniture, chattels and all
other equipment and shall, at all times, keep the leased premises clean and
sanitary. For this purpose, petitioner would allow the respondent's building
supervisor or his authorized representative to make a regular spot inspection
of the leased premises to see to it that these stipulations are strictly
implemented.2 Any damage caused to the furniture, chattels, equipment and
parts of the leased premises shall be the responsibility of petitioner to repair
and compensate.3 Furthermore, petitioner would give a deposit equivalent to
six (6) months rental to answer for whatever damages may be caused to the
premises during the period of the lease.4
I was so disheartened that after going through with the supposed public
bidding, haggling with the terms and conditions of a new lease agreement and
after full compliance of ALL your requirements and the handshakes signifying
the clinching of the deal, the contract was awarded to another party. Though I
believe I deserve a renewal, I had to accept your decision with a heavy heart.
Obviously, the letter was not answered, because on June 17, 1998 petitioner
found it necessary to write respondents a second letter reiterating his request
for the return of the deposit. The second demand letter reads:
It has been more than a week since my letter dated 8 June 1998 requesting
the return of my deposit of P500,000.00. I would assume your representative
had already conducted an ocular inspection and you were satisfied on the
restoration works made on the premises. As I ve stated in my said letter, I
want to be released as soon as possible.
I need to know immediately if I still have other things to comply with as pre-
condition for the release of the deposit. As far as I know, I have already done
my part.
With still no response from respondents, petitioner, on August 14, 1998, sent
a third demand letter which read:
Finally, on August 18, 1998, petitioner, thru his counsel, wrote respondents a
final demand letter as follows:
For ignoring the two letters of my client Mr. Jesus C. Cuenco, dated June 8 and
17, 1998 regarding his request for the return of his deposit in the sum
of P500, 000.00, he has decided to endorse the matter to this office for
appropriate action.
It appears that when Mr. Cuenco leased the cockpit complex he was required
to put up a deposit to answer for damages that may be caused to furnitures
(sic), chattels and other equipments and minor repairs on the leased
premises. When the lease expired and he failed to get a renewal, Mr.
Cuenco in fulfillment of his obligation under the contract caused the
repair of minor damage to the premises after which your attention
was invited to get your reaction to the restoration work. And since he
did not receive any objection, it can be safely premised that the
restoration was to the lessor's satisfaction.
Mr. Cuenco informed me that the new concessionaire has undertaken a full
blast major renovation of the complex. Under this condition and in the absence
of an accurate inventory conducted in the presence of both parties, it would be
doubly difficult, if not impossible, to charge Mr. Cuenco of any violation of his
undertaking especially as to deficiency in the furnitures (sic), chattels and
other equipments in the premises.
In view of all the foregoing, it is consequently demanded that you return to
Mr. Cuenco the aforesaid sum of P500,000.00 within THREE (3) DAYS from
notice hereof; otherwise, he may be constrained to seek judicial relief for the
return of the deposit plus interest, damages and attorney's fees.
On March 8, 1999, the RTC issued a Pre-trial Order,16 the pertinent portions of
which reads:
On May 24, 1999, the RTC issued an Order18 admitting the exhibits of
petitioner, consisting of the contract of lease dated May 4, 1994 and the four
(4) demand letters.
On July 29, 1999, an Order19 was issued by the same court formally admitting
the respondents' following exhibits: the lease contract, inventory of the leased
property as of June 4, 1998, inventory of the sports complex dated June 24,
1995, ocular inspection report dated January 15, 1998 and various receipts
mostly in the name of Southwestern University incurred in different months of
1998.
On August 11, 1999, the RTC rendered a Decision20 in favor of petitioner, the
dispositive portion of which reads:
The latter are, likewise, directed to pay [petitioner] the sum of P15,000.00 as
and for litigation expenses.
SO ORDERED.21
WHEREFORE, with the foregoing, the Decision of the Regional Trial Court,
Branch 13, Cebu City, dated August 11, 1999, is REVERSED and SET ASIDE,
and a new one entered finding this case in favor of defendants-appellants
Talisay Tourists Sports Complex and Matias Aznar III. Consequently, Civil Case
No. CEB-22847 for sum of money, damages, and attorney's fees involving
herein parties, as well as all other claims and counterclaims are
hereby DISMISSED for lack of factual and legal basis.
No pronouncement as to costs.
SO ORDERED.24
The CA ruled in favor of respondents on the basis of: (1) Coronado's testimony
that petitioner continued to hold cockfights two months after the expiration of
the lease contract which was not refuted by petitioner; (2) the summary of
repairs made on the property showing that respondents spent the amount
of P573,710.17 immediately prior to the expiration of the lease contract and
shortly thereafter; and (3) the new lessor incurred expenses amounting to
over P3 million when he shouldered the rest of the repair and renovation of
the subject property.25
The Issues
Petitioner raised the following issues for resolution of the Court: (1) whether a
judicial admission is conclusive and binding upon a party making the
admission; and (2) whether such judicial admission was properly rejected by
the CA.26
On the other hand, respondents posed the following: (1) whether the findings
of the CA that the cockpit sustained damage during the period of the lease was
rendered not in accord with law or with the applicable decisions of the Court;
(2) whether the CA committed an error of law in ruling that petitioner is not
entitled for the return of the deposit.27
The Supreme Court is not a trier of facts, and as a rule, does not weigh anew
the evidence presented by the parties. However, the instant case is one of the
exceptions to the rule because of the conflicting decisions of the RTC and the
CA based on contradictory factual findings. Thus, we have reviewed the
records in order to arrive at a judicious resolution of the case at bench.
Petitioner questions the CA's finding that there was damage caused the
premises while the lease was still in force. Such finding could only have been
based on alleged inventory of the property conducted by the respondents.
Petitioner takes exception to this evidence because of the earlier judicial
admission made by respondents' counsel that no inventory was conducted
and, accordingly, any evidence adduced by the respondents contrary to or
inconsistent with the judicial admission should be rejected.
ATTY. VASQUEZ:
A Yes, sir.
Q You said that you are in charge of the realty department, what is
your function with respect to the properties of Talisay Tourist and
Sports Complex? cralawred
Q When you said that you are in charge of the administration and
overseeing of the complex, what does it includes (sic)? cralawred
Q How long have you been employed with the Aznar Brothers Realty
Company? cralawred
A 25 years.
xxx
A There were missing and destroyed fixtures and physical damage sustained
by the complex.
xxx
COURT
xxx
Q W[h]y did you not take photographs of the damage sustained by the
complex? cralawred
A We did not take pictures, Your Honor, because in fact their
personnel were in our presence (sic) during the inspection, they were
accompanied by us, because we can not conduct inspection without
the presence of the personnel of Jesus Cuenco, Your Honor, the lessee.
A There was no refusal, but we did not initiate to let them sign and
confirm.
COURT
A Yes, sir.28
A party may make judicial admissions in (1) the pleadings, (2) during the trial,
by verbal or written manifestations or stipulations, or (3) in other stages of the
judicial proceeding.30 The stipulation of facts at the pre-trial of a case
constitutes judicial admissions. The veracity of judicial admissions require no
further proof and may be controverted only upon a clear showing that the
admissions were made through palpable mistake or that no admissions were
made. Thus, the admissions of parties during the pre-trial, as embodied in the
pre-trial order, are binding and conclusive upon them.
Respondents did not deny the admission made by their counsel, neither did
they claim that the same was made through palpable mistake. As such, the
stipulation of facts is incontrovertible and may be relied upon by the courts.
The pre-trial forms part of the proceedings and matters dealt therein may not
be brushed aside in the process of decision-making. Otherwise, the real
essence of compulsory pre-trial would be rendered inconsequential and
worthless.31 Furthermore, an act performed by counsel within the scope of a
"general or implied authority" is regarded as an act of the client which renders
respondents in estoppel. By estoppel is meant that an admission or
representation is conclusive upon the person making it and cannot be denied
or disproved as against the person relying thereon.32
Thus, respondents are bound by the admissions made by their counsel at the
pre-trial. Accordingly, the CA committed an error when it gave ample
evidentiary weight to respondents' evidence contradictory to the judicial
admission.
The appellate court's findings that the damage in the premises exceeded the
amount of the deposit is further sought to be justified, thus:
Furthermore, respondents are not entitled the full amount of the deposit
because the repair and renovation of the sports complex after the expiration of
petitioner's lease were undertaken not by respondents but by the new lessee.
This can be gleaned from Coronado's testimony on cross-examination, viz.:
Q You do not know. Mr. Witness, is it not a fact that the new lessee was
Wacky Salud? cralawred
A Yes, sir.
A They were about to conduct three months repair of the complex? cralawred
Q So, Mr. Wacky Salud conducted, did you say repair or renovation? Is it
renovation or repair? cralawre d
A Yes, sir.
COURT
Q In other words, after the expiration of the contract of Mr. Cuenco, Wacky
Salud took over? cralawred
A Yes, he took over that repair and renovation were no longer included in this
presentation, that is at his own expense.
Q Precisely. In other words, some repairs were made by Mr. Salud and not by
Aznar Brothers Realty? cralawred
A Yes, sir.36
Finally, the Court observes that the inventories presented by respondents were
not countersigned by petitioner or were they presented to the latter prior to
the filing of the case in the RTC. Thus, we are more inclined to agree with the
trial court that the "inventory was made as an afterthought,"37 in a vain
attempt of the respondents to establish their case.
A Yes, because it had happened on this extension of the lease because they
are still occupying until July after the expiration of the contract.
COURT
Q You mean to say that they still use the complex for the purpose for which it
was intended, which is for cockfighting? cralawred
WITNESS
ATTY. VASQUEZ
Q You mean to say that there were still cockfighting held in the complex even
after May 1998? cralawred
A Yes, sir.38
This two (2) months over-stay of petitioner in the leased premises should be
charged against the deposit. Because there was no renewal of the lease
contract, it is understood that the continued use of the premises is on a
monthly basis with the rental in the amount previously agreed upon by the
parties, in accordance with Articles 167039 and 168740 of the Civil Code.
WHEREAS, the FIRST PARTY is the owner of the Talisay Tourist Sports
Complex, Inc. located at Tabunok, Talisay, Cebu;
WHEREAS, the SECOND PARTY has expressed his desire to lease said complex
(cockpit) and the FIRST PARTY have agreed to lease/let the same to the
SECOND PARTY subject to the following term and condition, to wit:
1. In consideration of this lease, the SECOND PARTY agrees to pay the FIRST
PARTY a lump sum of ONE MILLION PESOS (P1,000,000.00) representing
advance rental for the first year, the same to be paid on May 8, 1994.
Thereafter, the rental shall be as follows:
Under Article 2213 of the Civil Code, "interest cannot be recovered upon
unliquidated claims or damages, except when the demand can be established
with reasonable certainty." In the instant case, the claim of petitioner is
unliquidated or cannot be established with reasonable certainty upon his filing
of the case in the RTC. This is because of the contending claims of the parties,
specifically, the claim of petitioner for the return of the P500,000.00
deposit vis-a-vis the claim of respondents on the arrears in rentals and on the
damage to the premises. It is only now that the amount that should be
returned is ascertained, i.e., P500,000.00 less the two-months arrears in
rentals amounting to P195,833.34, the sum of which will earn
interest at the legal rate of six percent (6%) per annum42 from the time the
case was filed in the RTC on October 21, 1998.43 Upon finality of this decision,
the rate of interest shall be twelve percent (12%) per annum from such
finality until full satisfaction. The foregoing interest rate is based on the
guidelines set by the Court in Eastern Shipping Lines v. CA, viz.:
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality
until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.44
(1) Talisay Sports Complex, Inc. is solely liable to return the amount of the
deposit after deducting the amount of the two-months arrears in rentals; and cralawlib rary
(2) The rate of legal interest to be paid is SIX PERCENT (6%) on the amount
due computed from October 21, 1998, and TWELVE PERCENT (12%) interest,
thereon upon finality of this decision until full payment thereof.
SO ORDERED.