G.R. No. 174154 October 17, 2008
Though I believe I deserve a
JESUS CUENCO, petitioner,
vs.
TALISAY TOURIST SPORTS COMPLEX, INCORPORATED AND
MATIAS B. AZNAR III, respondents.
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
The antecedent facts of the case are as follows:
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
Upon expiration of the contract, respondent company
conducted a public bidding for the lease of the property.
Petitioner participated in the bidding. The lease was
eventually awarded to another bidder, Mr. Rex Cuaqui
Salud.5 Thereafter, petitioner wrote four (4) demand
letters to respondents.
The first letter, dated June 8, 1998, reads:
Dear Mr. Aznar:
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.
renewal, I had to accept your decision with a heavy heart.
It is now my desire to be released quickly from whatever
liability or responsibility under our previous contract.
Repair works on some damaged portions were already
done. Based on our contract, par. 5 thereof, it is my
understanding that I am answerable to all damages
caused to furnitures (sic), chattels and other equipments
and minor parts of the leased premises. Once cleared, I
want the return of my deposit of ₱500,000.00.
Kindly send your inspector to determine by actual ocular
inspection if the restoration work is to your satisfaction.
Very truly yours,
JESUS C. CUENCO [signed]6
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:
Dear Mr. Aznar:
It has been more than a week since my letter dated 8 June
1998 requesting the return of my deposit of ₱500,000.00.
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.
Very truly yours,
JESUS C. CUENCO [signed]7
With still no response from respondents, petitioner, on
August 14, 1998, sent a third demand letter which read:
Dear Mr. Aznar:
I am surprised by the unreasonable delay in the release of
my deposit of ₱500,000.00 in spite of my full compliance
as to repair works on minor damage to the premises
during my term as lessee. Twice I requested in writing for
the immediate release of my deposit but until now it
remains unheeded. And the so-called "inventory" which
your lawyer Atty. Algoso8 promised to give has not been
given. Frankly, I am doubtful of the accuracy of said
inventory, if any, considering the full blast major
renovation now being conducted on the complex by the
new concessionaire. I think it’s about time we close the
last chapter of the book, in a manner of speaking, so we
can proceed in our separate distinct ways.

I reiterate my request to please release right now my
deposit of ₱500,000.00.
Very truly yours,
JESUS C. CUENCO [signed]9
Finally, on August 18, 1998, petitioner, thru his counsel,
wrote respondents a final demand letter as follows:
Dear Mr. Aznar:
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 ₱500, 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
₱500,000.00 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.
Your compliance is enjoined.
Very truly yours, At my instance:
FEDERICO C. CABILAO (signed) JESUS C. CUENCO
(signed)
Counsel for Mr. Jesus C. Cuenco10
As all of his demand letters remained unheeded, on
October 21, 1998, petitioner filed a Complaint11 for sum
of money, damages and attorney’s fees. He maintained
that respondents acted in bad faith in withholding the
amount of the deposit without any justifiable reason.12
In their Answer,13 respondents countered that petitioner
caused physical damage to some portions of the leased
premises and the cost of repair and replacement of
materials amounted to more than ₱500,000.00.14 They
also averred that respondent Matias B. Aznar III (Aznar)
cannot be sued personally under the contract of lease
since a corporation has a separate and distinct personality
from its officers and stockholders, and there was no
allegation that Aznar, who is the President of the
corporation, signed the contract in his personal
capacity.15
On March 8, 1999, the RTC issued a Pre-trial Order,16 the
pertinent portions of which reads:
The following facts were admitted by the [respondents]:
1. There is no inventory of damages up to this time;
2. [Petitioner] deposited the amount of ₱500,000.00;
3. [Petitioner] sends (sic) several letters of demand to
[respondents] but said letters were not answered.
4. There was a renovation of the Talisay Tourist Sports
Complex with a qualification that the renovation is only
10% of the whole amount.
The main issues in this case are as follows:
1. Whether or not [petitioner] is entitled to the return of
the deposit of ₱500,000.00, with interest;
2. Whether or not some portions of the complex
sustained physical damage during the operation of the
same by the [petitioner].17
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:
WHEREFORE, judgment is hereby rendered in favor of
[petitioner] and against the [respondents], directing the
latter jointly and severally to return to [petitioner] the
sum of ₱500,000.00, representing the deposit mentioned
in the Complaint, plus 3% interest per month from August
18, 1998 until full payment thereof.
The latter are, likewise, directed to pay [petitioner] the
sum of ₱15,000.00 as and for litigation expenses.
With costs against the [respondents].
SO ORDERED.21
The RTC ratiocinated that respondents’ failure to reply to
the letters of petitioner raises a presumption that
petitioner has complied with his end of the contract. The
lower court gave credence to the testimony of
respondents’ witness, Ateniso Coronado (Coronado), the
property custodian of the respondents, that the sports
complex was repaired and renovated by the new lessee.
The court also considered the admission of respondents’
counsel during the pre-trial that no inventory of the
property was conducted on the leased premises. The RTC
debunked the inventory presented by the respondents
during trial as a mere afterthought to bolster their claim
against petitioner.22
Respondents appealed. On April 18, 2005, the CA
rendered a Decision23 reversing and setting aside the
decision of the RTC. The fallo of the CA decision reads:
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 ₱573,710.17
immediately prior to the expiration of the lease contract
and shortly thereafter; and (3) the new lessor incurred
expenses amounting to over ₱3 million when he
shouldered the rest of the repair and renovation of the
subject property.25
Hence, the instant petition.
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 ultimate question we must resolve is whether
petitioner is entitled to the return of the amount
deposited.
The Ruling of the Court
We rule in the affirmative. Respondents failed to present
sufficient proof to warrant the retention of the full
amount of the deposit given by petitioner.
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.
Indeed, at the pre-trial conference, respondents’ counsel
made an admission that no inventory was made on the
leased premises, at least up to that time. This admission
was confirmed in the Pre-Trial Order issued by the trial
court on March 8, 1999 after the lease expired on May 8,
1998.
Yet, on July 1, 1999, respondents’ witness Coronado
testified, as follows:
ATTY. VASQUEZ:
Q Why do you know the defendants?
A Because Talisay Sports Complex is owned by Aznar
Brothers Realty Corporation of which I am employed as
(sic) in charge of the realty department.
Q How about Matias Aznar III, the defendant here?
A He is the Chairman of the Board.
Q Board of what?
A Of the Aznar Brothers Realty Corporation.
Q Is he the Chairman of Talisay Tourist Sports Complex?
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?
A I am the in-charge of the administration and overseeing
of the complex owned by Talisay Sports Complex.
Q When you said that you are in charge of the
administration and overseeing of the complex, what does
it includes (sic)?
A It includes collection of rentals of complex and routine
inspection to determine that there are missing or damage
of (sic) the properties.
Q How long have you been employed with the Aznar
Brothers Realty Company?
A 25 years.
xxxx
Q In your earlier testimony, you said that part of your
function is to conduct routine inspection of the complex.
Now, was there a routine inspection conducted during the
period of the lease contract between plaintiff and the
defendant?
A Yes, we conducted inspection sometime in January
1998.
Q For what purpose was that inspection?
A The purpose is to determine if there are damage
sustained by the complex.
Q And what was the result of the inspection.
A There were missing and destroyed fixtures and physical
damage sustained by the complex.
xxxx
COURT
xxxx
Q W[h]y did you not take photographs of the damage
sustained by the complex?
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.
Q Did the personnel of Jesus Cuenco sign any paper
acknowledging receipt of any report?
A There was no refusal, but we did not initiate to let them
sign and confirm.
COURT
Q So, we have to rely on your testimony?
A Yes, sir.28
Obviously, it was on Coronado’s testimony, as well as on
the documentary evidence29 of an alleged property
inventory conducted on June 4, 1998, that the CA based
its conclusion that the amount of damage sustained by
the leased premises while in the possession of petitioner
exceeded the amount of petitioner’s deposit. This
contradicts the judicial admission made by respondents’
counsel which should have been binding on the
respondents.
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 a showing that it was made
through palpable mistake or that no such admission was
made.
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:
Verily, a perusal of the summary of repairs amounting to
₱573,710.17 claimed to have been made by appellants
over the property at about that time immediately prior to
the expiration of the lease contract and shortly
thereafter, would show that the repairs pertained to
repairs on the drainage, sewage, immediate premises and
structure of the complex. We find the same highly
credible and meritorious considering that as earlier
admitted by appellee, the repairs he made were minor
and were confined only to certain portions of the
complex, although substantial repairs were done on the
cockhouses only, and that said repairs were done because
of a coming big time derby and not to satisfy the
provisions of the lease contract. Also, by implication,
appellee is stating that the new lessor incurred expenses
amounting to over ₱3 million when he shouldered the
rest of the repair and renovation of the complex after the
term of lease of appellee.33
Yet, upon perusal of the receipts presented by
respondents, we found that majority of the receipts are
under the name of Southwestern University. In their
Memorandum,34 respondents aver that Southwestern
University and respondent corporation are sister
companies.35 Even if true, this matter is of no
consequence because respondent company and
Southwestern University have distinct and separate legal
personalities, and Southwestern University is not a party
to this case. Thus, we cannot just accept respondents’
argument that the receipts paid in the name of
Southwestern University should be credited to
respondent company. In any event, they were not able to
prove that those receipts were in fact used for the repair
or maintenance of the respondents’ complex.
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?
A Yes, sir.
Q And that was sometime of July or August of 1998?
A They were about to conduct three months repair of the
complex?
Q So, Mr. Wacky Salud conducted, did you say repair or
renovation? Is it renovation or repair?
A There was a renovation and repair.
Q Renovation including repair?
A Yes, sir.
COURT
Q In other words, after the expiration of the contract of
Mr. Cuenco, Wacky Salud took over?
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?
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.
However, Coronado’s testimony that petitioner extended
the operation of the sports complex for a period of two
months after the expiration of the lease without the
respondents’ authority and without the payment of
rentals, remains unrebutted. Enlightening is the following
testimony:
Q I observed here in No. 16 of your summary, two months
arrears rentals, June to July, how come? The contract was
supposed to expire May 1998?
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?
WITNESS
A Yes, they are still doing their usual operation.

ATTY. VASQUEZ
Q You mean to say that there were still cockfighting held
in the complex even after May 1998?
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.
In the Contract of Lease of petitioner and respondent
company, it was agreed that the rental to be paid shall be
the following:
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 (₱1,000,000.00) representing advance
rental for the first year, the same to be paid on May 8,
1994. Thereafter, the rental shall be as follows:
Second year
- follows:
₱1,050,000.00 or ₱87,500.00/month
Third year
- shall itself earn legal interest from the time it is judicially
1,100,000.00 or ₱91,666.67/month
Fourth year
-
1,175,000.00 or ₱97,916.67/month41
Thus, by way of rental for the two-month overstay, the
amount of ₱195,833.34 should be deducted from the
amount of deposit paid by petitioner to respondent
company.
As to petitioner’s claim of interest of three percent (3%)
per month on the amount due him, the same is without
legal basis. We note that no amount of interest was
previously agreed upon by the parties in the contract of
lease.
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
₱500,000.00 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., ₱500,000.00 less the two-months arrears
in rentals amounting to ₱195,833.34, 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.:
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on "Damages"
of the Civil Code govern in determining the measure of
recoverable damages.
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
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.
2. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly,
where the demand is established with reasonable
certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest
shall begin to run only from the date of the judgment of
the court is made (at which time the quantification of
damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount of finally
adjudged.

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

Concerning the solidary liability of respondents, we hold

that respondent Matias Aznar III is not solidarily liable
with respondent company. His function as the President
of the company does not make him personally liable for
the obligations of the latter. A corporation, being a
juridical entity, may act only through its directors, officers
and employees. Obligations incurred by them while acting
as corporate agents, are not their personal liability but
the direct accountability of the corporation they
represent.45

WHEREFORE, the petition is PARTLY GRANTED. The

Decision of the Court of Appeals is hereby REVERSED AND
SET ASIDE. The Decision of the RTC in Civil Case No. CEB-
22847 is hereby REINSTATED with the following
modifications:

(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

(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.