;'f<r :"\

l\epublic oi tbe ~biUppine~

~upreme <tourt
jff{anila

SECOND DIVISION

PNTC COLLEGES, INC., GR. No. 219698

Petitioner,
Present:
PERLAS-BERNABE, SAJ.,
Chairperson,
HERNANDO,
- versus - INTING,
GAERLAN1 and
DIMAA...\1PAO. JJ.

Promulgated:
Tll.VIE REALTY, INC.,
Respondent,
x -- -- --~--- - ------------, -----,.,~..,. -- -- . - -- - - - - - --x

DECISION
HERNANDO,J.:

This Petition for Review on Certiorari 1 challenges the April 8, 2014

Decision2 and March 26, 2015 Resolution3 of the Comt of Appeals (CA) in
CA-G.R. CV No. 97119, which set aside the June 15, 2010 Decision4 and
April 4, 2011 Order5 of the Regional Trial Court (RTC) of Manila, Branch 21 ,
in Civil Case No. 07-117895.

The Facts:

PNTC Colleges, Inc. (PNTC) and Time Realty, Inc. (Time Realty)
entered into a Contract of Lease6 wherein Time Realty leased to PNTC the

1
Rollo, pp. 3-21.
Id. at 202-214. Penned by Assoe(at\! ll!stjce Danton Q. Bi1eser a,1d concurred in by Associate Justices
Rebecca De Guia--Sa!vador and Ramon R. Garcia.
3 Id. at 241-242. Penned !Jy Associate Ju~tice Dant~rn Q. Hueser and con~urred in by Associate Justic\'JS
Ramon R. Garc;ia ~nd Rod!I V. Za!ameda (new a m~mber of this CoUi't).
4
Id. at 116-120. Penned by Judge Arnor A. Reye~.
,s Id. at 146- 14 7. Penned by~ 1)dge Amor A. Reyes.
6
id. at 43-53.
 Decision G.R. No. 219698

Extremadura Streets, Sam.palQc, M~ihi., from 2005 to 2007. 7 \Vhile t..h.e term
of the lease ended on December 31, 2005, the contract was impliedly renewed
on a montrJy basis aft@r said date. With the acquiescence of Time Realt'j,
PNTC continued to occupy the premises for an inr;;rea,sed rental rate. 8

Eventually, Time Realty notified P:N"'TC of its (Time Realty's) intent not
to extend the lease on the fourth floor anymore. For this reason, Time ReaJty
provided P1'."'TC two options: (1) to extend the lease on the fourth floor but
only until April 2007; or (2) to transfer to t..l-i1;; second floor of t.½.e same
building. In a letter9 dated April 4, 2007, PNTC informed Time Realty of its
decision to terminate its lease in the fourth floor which would take effect at the
end of April 2007. 10

Sometime in April 2007, PNTC com1nenced the transfer of its

operations to its new site in Intramuros, Manila. H9wever, Time Realty
alleged u'tat PNTC did so ,vithout settlbg its (PNTC's) outstanding rentals and
service (electricity and watfr) cMrges, plur, interest/su.rch11irges. Hence, Time
Realt-; or<lered PNTC to cease its moving out operations, then retained the
remaining properties of P-NTC in the premises. 11

Time Realty averred that its retention of PN1C's properties as security

was in accordance with Pan,graph J::'! of the Contract of Lease, viz. :

Breach or Default

xxxx

LESSEE hereby agre~s t.¾.at all the provisions c9ntained in t.½is contract shall be
de<lm(;d as coµditions, as well as cov,;nants, ?fld that this contract shall be
autom~tically t~rmh-iat~d ~+d 'can~eHed \Vltho;J.t resorting to court action should
LESSEE vioiate any or all said conditions, including the payment of rent and
0th.er charges indicated in this contract due vlithin the time herein stipulated and
in any such cases, LESSEE hereby imwocabiy appobJtS LESSOR, its
authorized :a.g½nts, employees a.r::.d/or representatives as his duly 9-uthorized.
attomey-in-fru;:t, wit.½. full authority to Qp~n, enter, r~pQ$S~ss~ secur~, enclose,
fence and oth<>rwise take full J~'ld compl~te physical posses~ion and control of
the leased premises and its contents v.itho.ut resorting to court action a,i."1d/or
s~'U!"narily disconnect eiectrical imd/or water servio,:os thereof, and that LESSEE
hereby i.._ryevocably e:rn.pqwers LESSOR~ its au.thotj.zed ag~nts~ employees
and/or representatives to tru;ce irrv~nto~y anQ. possession of vvhatever equipment,
furniture, articles, merchandi~e~ appH~1.ce~, etc. f(?~d ther~in belongiµg to the
LESSEE, consignors a,'ld/or to any other p~rson and to place t':le Sfu"Ile in
LESSOR's wareh.oµ.se for ~afek.~eping, chatging ~ESSEE the corresponding
storage fees therefore, W..at in cruie LESSEE fails to claim said equipment,
furr.i.iture, articles, merchar1dise, appliances, etc. from storage and

7
Id. at 202-203.
s Id. at 39.
s; ld. at 54 a.TJ.d 58.
10
Id. at 203.
Id.
Decision
~
-.J- G.R. No. 219698

simultaneously liquidate a,,y liability with LESSOR within ten (10) days from
date of said transfer to LESSOR's warehouse, LESSOR is likewise hereby
expressly authorized and empowered by LESSEE to dispose of said
property/properties in a public sale through a Notary Public of LESSOR'S
choice and to apply ti'ie proceeds thereof to whatever liability and/or
indebtedness LESSEE may have to LESSOR plus r!';asonable expenses for the
same, including storage fees and balance, if at,y, shall be turned over to
LESSEE, that LESSEE hereby expr~ssly agrees that any or all acts performed
by LESSOR, its auLhorizer,i agents, emphJye<,s and/or representatives [under the
provisions] of t.lus Section m<JY not be the subject of any petition for a \Vrit of
Preliminary Injum;ition or Mat,datory Inju,-iction in court, and that LESSOR
and/or his authorized agents, employees and/or representatives shall be free
from any civil and/or criminal liability or responsibillty whatsoever therefore. 12

On J\1ay 7, 2007, PNTC sent a Letter (Re: Unjustified Withholding of

Numerous [Equipment], Machineries, a.n.d Other Related Materials \Vhich
Greatly Damage our Operations) 13 to Time Realty stating its intention to seek
legal action to protect its interests. 14

Thus, PNTC filed a Complair,t15 for Delivery of Personal Properties with

Damages dated August 18, 2007 before the RTC. It essentially alleged that it
suffered serious losses due to Time Realty's unjustified withholding of its
properties valued at ?561,360.00 16 after employees of PNTC made an
inventory. 17

Time Realty filed an Answer with Counterc1aim 18 arguii'lg that PNTC

started vacating the leased premises absent a formal notice and without paying
its remai11ing obligations. It asserted that since discov.;iry of PNTC's moving
19
out operations sometime in April 2007, Time Realty retained and h1ventoried
the remaining items, most of which could not be removed without damaging
t,_½.e property. Time Realty contended that pursuant to the lease c:ontract, it had
the right to withhold the properties to cover PNTC's payables and damages
caused to the property. 20 By way of counterclaim, Time Realty prayed for the
payment of the unpaid rentals and service charges with interest from May
2007. 21

Also, Time Realty averred that PNTC left without restoring the
preIPises in the same condition it was fourJJ4 at the beginning of the lease.
Hence, Time Realty engaged the services of a general contractor in order to
22
restore the premises to a temintable condition wr,fol1 costs fS,095,822.24 as

12 Id.at51.
13
Id. at ~2.
14 Id. at 205,
15 Id. at 25-i~t.
16 Id.at3l.
17 TSN, June 15, 2009, pp. 6-7,
18 Rollo, pp. 35-42,
19 ld. at 74.
20 Id: at 205,206.
21 ld. at 206.
22 Id. at 76.,77.
 Decision G.R. No. 219698

of December 3, 2008. It thus sought the reimbursement of the expense of

restoration of the premises and al::;o attorney's foes. Significantly, it ad..mitted
that PNTC had rental deposits totaling '?743,640.00. 23

PNTC, in its Reply, 24 denied tl1at the lease contract was still in effect
when the properties were confiscated. It argued that th.e parties' relationship
should be based on a mont.hly rentaJ basis. 25 Moreover, PNTC submitted
copies of check vouchers26 payable to Time Realty to answer for its
liabilities27 but these were not actually tendered to the latter. 28

Notably, however, PN!C alleged t..hat it Md an agreement wit,11 Time

Realty (supposedly through Time Re!1-It-y's representative, Natividad Ocampo)
that it (PNTC) would settle its obligations after the transfer of all its properties
has beim finalized. 29 In addition, P°l'ITC stated that it was prepared to make
payments as far as Ui,paid rentala apd :;;ervicr;o charges were concerned, less its
secu..'"lty deposits with-Time Realty. 30

The Ruling of the Regional Trial Court:

In a Decision31 dated June 15, 2010, the RTC dismissed the Complaint3 2
and found that PNTC has no cause of action against Time Realty. It noted that
the lease contract's effectivity ceased a year after its execution without need of
demand. However, even without a subsequent lease contract, Time Realty
allowed PNTC to continue occupying the premises and collected monthly
rentals therefrom, creating an implied new lease (tacita reconduccion) in
accordance with Article 1670 ofthe Civil Code. 33

The trial court found that PNTC violated Paragi-aph 23 of the Contract
of Lease when it vacat1;d the pnirµises without settling all of its obligations,
notwithstanding receipt of the Statement of Accmi.ri.t frpm Time Realty.
Because PNTC did not tender rental an.d servi9e charge payments since t11e
lease was tenninated in April 2Q07, the trial court held that it did not comply
with. the contract in good faith. Thus, Time Realt'j was justified to seize
PN!C's properties pursuant to the lease contract. Notably, however, the RTC
denied Tii-ne Realty's counterclaims for lack ofbasis. 34

23 Id. at 40.
24 ld. at 55-5/.
25 id. at 55 and 206,
26 Id. at 59-62.
2
' !d. at 55; TSN, June 15, 2009~ p. 20.
28 TSN, August 7, 2009, p. 15.
'9 0 allo p "5· TSN· '•me· 's ~oo 0 n~ 1·1 ' "
.l,t .:J,
M<, l ,J-· 1...,.,L.·_ .,.,}'}'• -~.,,.

so TSN, Jun~ 15~ ~009, pp. 25-2{1.

31 Rollo, pp. lJ6.. 120.
32
Id. at 120.
33 Id.at 119,
34 ld. at 120.
 Decision -5- CiR. No. 219698

Both PNTC35 and Time Realty36 filed their respective Motions for
Partial Reconsideration which the RTC both de11ied in an Order3 7 dated April
4, 2011. The RTC reiterated that PNTC's continuous refusal to settle its
obligations justifies Time Realty's retention of the properties. Relevantly, the
trial court ruled that since Ti.me Realty already has complete physical
possession and control of PNTC's properti<Js, lh11just er1richment would arise if
th<J farmer's counterclaims would still be granted even without 1}1e accounting
and valuiition of the saiii properties. 38

, Aggrieved, Time Realty appealed39 to the CA.

The Ruling of the Court of Appeals:

The CA, in its assailed April 8, 2014 Decision,40 granted Time Realty's
appeal. It noted that PNTC made the following judicial acirnissions, 41 to wit:

[PN"TC] itself admitted its liability to [Time Realty] in its reply to answer of the
latter saying that it never refus~d to pay any aileged obligation. Furthf;r, as
claimed by [PNTC], it agreed through a certain Ms. Natividad Ocampo that
whatever deficiency, if a,.-;y, would be p;tld after ti'le transfer to its new office
"t
s1.e.

Moreover, in the sa,.11e reply, [PNTC] said that checks and vouchers
were prepared a.,id ready for transmittal; that it no longer turned over the checks
as it has suffered tremendous losses and sustained considerable damages by the
unjustified and unlawful action 9n the part of [Time Realty].

Significantly, [PNTC] marked in evidence as Exhibit '2' the Summary

of Payables prepared and signed by one Francilita 0. Corres from the farmer's
fi'lfillce department rnanifesting its unpaid rents and electricity and water
charges for t,'1e months of March a.-;d Aptll 2007.

Likewise, in paragraph 4 of [PNTC's] Comment/Opposition dated 24

September 2010, [PNTC] agreed with. the findi_Tlgs of the [RTC] that its non-
payment is sufficient basis for [Time Realty] 'to take full iind complete physical
possession a.11d control of the personal property taken by [Time Realty] pursuant
to paragraph 23 of the Contqct of Lease of the parties. ' 42

The appellate court held that 'lime Realty presented s1.rfficient evidence to
prove its counterclaims, ''i.e., [PN'TC'sJ violgtlo~ oft'1e ~ontract ofiease sµch
as non-payment of rentals, iJtilities, surcharges and cost of repg.irti, which

35
Id; at 137~14i.
36 Id. at 111-129.
37 Id. at 146-147
38
id. at 146.
39 Id. at 148-149.
4D Id. at 202-214.
41
Id. at 209-210.
42
Id. at 209.
 Decision -6- G.R. No. 219698

[PNTC] failed to dispute."43 Thus, it ruled that it was grave error for the trial
court to diswis;; Time Re;,.lty's cour1terciaims for lack ofbasis. 44

l'v1oreover, the ?,ppellate court did not agree with t.he RTC's ruling on
l4,tjUst en.richment. It pointed out that a ciaim for ;.rr,just ernichi,1ent fails when
t.11.e entity wl:J.o will benefit, like Time Realty, has a valid right therein. It noted
that Time Realty retained PNTC'$ personal pn;1pertie:;; because of tile latter's
unpaid obligations and that such wit.½.holding was made pursuant to Paragraph
23 of the leas(;) contract. 45 Also, the appellate court noted th.at PNTC failed to
prove the true value of the properties w,l:,Jch were retai,'led by Time Realty, and
failed to justify that such would be sufficient to cover or set-off its unsettled
acco1mtabilities. Simil!lrly, thlc'l CA did not find merit in PNTC's argument that
unjust enrichment would ensue withqut Time Realty's accounting and
valuation of the pgn,onal properties. 46 Hence, the dispositive portion of the
CA's assailed Decision reads:

\VHEREFORE, in viC;Jw of the foregoing, the Order dated 4 April 2011

of the Regional Trial Court of Ma..'lila, Branch 21 denyi_.'lg the Motion for Partial
Reconsidemtion of defendant-appsi!lant Time Realty[,] Inc. is hereby
REVERSED and SET ASIDE.

Accordingly, plaintiff,appellee PNTC Colle~<;s, Inc. is ORDERED to

pay t11e defenda'lt-;appt;ll&nt irime Realo/, Inc.] t½.e following amounts:

1. Php870,038.40 for mipaii;\fent<jl~;

2. Php340,09Q.48 for UB.paj,;i µtiiitie~ (electricity 1Ul4 "'atilr);
3. Php5,09$,8'.4'.Z.34 for the r;.,stora.tion of¢e k;;,.seq prnnuses; iil!ld,
4. Phpl00,000.00 for attorney's fe~s.

SO ORDERED.47

PNTC asketl for a reconsideration48 which t,.':ie CA denied in a

Resolution49 dated rvfarch 26, 2015. PNTC then filed t..½.e instant Petition for
Review on Certiorari50 before tt"'le C,:n.u"t and raised the folh:iwing -

Issues:

V..'}IETHER THE COURT QF APPEALS ER.REP WHEN IT REVERSED

A't','D SET ASIDE TBE ORPBR OF THE RTC lvilil•nLA PATEP APRIL 4,
2.011 DENYING TIME REALTY'S MOTION FOR FAR,TL-'\L
RECONSIDERATION OF THE DECISION Of THE RTC rvlA,,.",HLA DATEP
JUI-IE 15, 20HL

..., id.at210.
44
ld. at 211.
45
Id.at21.1~212.
46 !d. &t212•2i3.
47
Id.at.213.
48 Se~ i4. at215~219 an,µ 2~3~??7.
49
fd, at 24 l "."242
so IQ.. at 3:,,21.
Decision -7- G.R. No. 219698

WHETHER THE COlJRT OF APPEALS ERRED IN ORDERING PNTC TO

PAY TO TIME REALTY P870,038.40 FOR u1'<1'AID RENTALS, P340,090.48
FOR UNPAID UTILITIES (ELECTRICITY AND WATER), P5,095,822.34
FOR THE RESTORATION OF THE LEASED PREMISES, Ai"JD Pl00,000.00
FORATTORc"JEY'S FEES. 51

Thus, the main issue 1s whether or not Time Realty's counterclaims

should be granted.

Our Ruling

The petition has no merit

PNTC argues that the CA placed much emphasis on its admission that it
had unpaid accountabilities which would justify tl1e withholdirig of its
properties. It points out that Time Realty was aware of its intended transfer, as
it could not have moved out 90% of its prop<,~rties without notice and consent
from Time Realty (considering t1,e gate p11sses which Time Realty issued and
the security guards posted in the building). PN""TC ass1;rts that the parties
agreed that it would settle its liabilities, if any, after its complete transfer. It
likewise questions the ad..'llission of the Su,.-n_111ary of Payables52 it issued as the
said document was only presented during t.h.e mediation proceedings. 53

Moreover, PNTC insists that un.just enrichment would result if Time

Realty's counterclaims would be granted, especially when proper accm:mting
ai,d valuation of the properties have not been made. 54 Moreover, it disagrees
that it should reimburse the expenses for the restoration of the fou,-th floor as it
denied inflicting damage on t.he premises. 55 Similarly, it questions the award
of attorney's fees in favor of Time Realty. 56

Conversely, Time Realty contends that the grant of its counterclaims is

compatibie with its possession of P1\i'TC's propertie,,. 57 It emphasiz<1s that "the
mere existence of a security does not extinguish ti½.e obligation. Accordingly,
th_e fact that [Time Realty] has in its possession seveniJ of [PNTC's] personal
properties does not mean that [PNTC's] undisputed obligations no longer
[exist].. By granting. [Time Realty's] cmmterclaims, the CA merely
, '

[recognized], a11d correctly so, the continuing existence of [PNTC's]

'. - . CT" R
obli&ation to Li1me ..ea.,.ty_J.,
1 l ,,so
0
~
-

51 ld.atlO.
52 Id. at 73; A document issued by PNTC which indicated, foat it h~d ac.coµnW:bilities for March and April
2007 covering r~n.tal arr?ars mid utility ch,arges:,
53 Id. at 11-12.
54 Id. at 12-13 and 346.
55 Id. at 13-14 and 347.
56
Id. at 14-15 and 348.
57 Id. at 256-258.
58
Id. at 258.
Decision -8- G.R. No. 219698

Time Realty asserts that prior accounting is not necessary for its
counterclaims to be granted. Unjust en.'1.chment can onJy possibly arise if Time
Realty would still refuse to tum over the personal properties even after PNTC
satisfies the monetary award in its (Time Realty's) favor. 59 It states that by the
recognition of its counterclaims, it is given the choice to satisfy PNTC's
iiabilities throug..h the possessory lien or by other means allowed by the Rules
of Court to execute the judgment award. 60

Furthermore, Time Realty questions the inclusion of the factual issue

involving the alleged previous agreement to allow PNTC to remove all the
properties first before paying all of its unsettled accounts, as it is not wifain
the purview of a Rule 45 petition. 61 In any case, it posits that since Pt,.1TC did
not appeal the RTC's dismissal of the Complaint, then it (P:1\T'fC) is barred
from raisin,g tliis factual issue before the Court. 61

Also, Time Realty maintains that its entitlement to the reimbursement of

the costs of restoration of the leased premises is another factual issue which
was correctly resolved in its favor by the .RTC and the CA, especially when
PNTC did not actually dispute the costs before the said cou..rts. 63 Finally, it
claims that it is entitled to attorney's fees. 64

To stai."1:, aI1 assessment of the records affirms the finding that P1'ITC is
liable to Time Realty for rental arrears &'1d service charges. PNTC even
ack._'1owledged this, yet it justified its non-payment by arguing that it had a
·
previous agreement vv1t.1 .•'- ·~·
11me ~ · Lat
Kea!ty h · n.111
~ .. ·11 'oe made a ft~er a
payment \Vl.u.
complete transfer of its properties. Since PNTC failed to prove this allegation
with sufficient evidence, its obligations must be :fulfilled in accordance with
law and the lease contract. Particularly, PNTC incurred liabilities because it
vio\ated the provisions of the Contract of Li;Jase which it willingly signed.

·
In VleW O...F 1-. •
tu.IS, ,,. • v.;ei'l to ren1em,oer
wlt lS ' t h1at a contra.ct lS
. tne
' 1av,.r
between the 65
parties. Obligations. arislr.g from contracts have the force of law
benveen the contras::ting parties and should be complied with in good fait.11. 66
The parties are allowed by law67 to enter into stipulations, clauses, terms and
conditions they may ~eem convenient ,,vhich bind the parties as long as they
are not contrar:r· to la:vv, morals~ good custorns, public order or public policy.$' 68

59 Id.
60
ld. at 258,..259.
c; id. at 259-260_
61 Id, at 260.
63
!d. at 261.

ts D.t,;f. Ragasa Enterpris,;s1 Jm;,._ v. Banca De 01"./, Im::,, 83:~ PhH. 64Q, 652 (20! 8) dting lvfor-Ja v, f:Jelrr;.at:tc:,
678 PhH. i 02, I07 (]O 1J).
66 Jd. citing CiViL CODE, Art 1159.
67
Id. citing CIVlL CODE, Art. i 306,
68 Id,
Decision -9- G.R. No. 219698

Essentially, the stipulations in the Contract of Lease "are clear and show
no contravention, of law, morals, good customs, public order or public policy.
As such, they are valid, and t.½.e parties' rights shall be adjudicated according
to them, being t..he primal"/ law between them. When the terms of the contract
are clear and leave no doubt as to the intention of the contracting parties, t..he
rule is settled that the literal mea."ling of its stipulations should control."69

Relevantly, the lease contract provides that Thne Realty has the
prerogative to t<'lke control or possession of PNTC's properties in the event the
latter violates a provision of the contract, including non-payment of rent and
other charges. Throug,11 its judicial admissions 70 which the CA already took
note, there is no doubt that PNTC should settle tI1e said obligations in
accordance vvi.th the Contract ofLease 71 a...7.d applicable laws.

To expound, PNTC incurred foe obligations mainly because of

Paragraph 23 of the Contract of Lease which states that Time Realty can retain
PNTC's properties as security for unpaid rentals and ot11er charges. Even
while Time Realty exercised its right under the contract, PNTC still filed a
Complaint to recover its properties. By doing so and yet still refusing to pay,
PNTC somehow preempted Time Realty's option to file its own case in order
to collect from the former. Hence, Time Realty filed an Answer wit.11
Counterclaim instead. Nonetheless, as Time Realty was forced to resort to the
measures specified in the contract to protect its interests, its counterclaims
should be granted. This is because these counterclaims are i.11timately related
to the subject matter of t..h.e Complaint, particularly the personal properties of
PNTC, which have been vvithheld and stored by Time Realty. A compulsory
counterclaim is described as follows:

A compulsory counterclaim is a defendant's claim for money or other

relief which arises out of, or is necessarily coTu,ected with, the subject matter of
the complaint. In Spouses Ponciano v. Hon. Parentela, Jr.:

A compulsory counterclaim is any claim for money or other relief which a

defending party may have agaiJ1st at, opposing paxty, which at the time of suit
arises out of, or is necessarily coruiected v.ith, the san1e tra.11Saction or
occurrence that is the subject matter of plaintiff's complaint. It is compulsory in
the sense t.1-iat if it is wifrtln t..½.e jurisdiction of the cow'1:, and does not require for

69 Id. citing CIVIL CODE, Art. 1370 and Heirs of Uy Ek Liangv. Castillo, 710 Phil. 261, 275-276 (2013).
70
RULES OF COURT, Rule 129, § 4.
Section 4. Judicial Admissions. - ~A,. .r1 admission: verbal or written: made by the party in the
course of the proceedings ID the same case, does not require proof. The admission may be
contradicted only by showing that it was made through p2lpable mistake or that no such
ad...1t1ission was made.
71
Said lease contract was renewed monthly, as Time Realty acquiesced to PNTC's continued lease of
the premises even if the parties' initial contract a!re~d.y expired1 pursuant to Article 1670 of the
Civil Code, to wit:
Article 1670. Ifat the end of the contract the lessee should Gontinue eajoying the thing leased
for fifteen days tvith the acquiescence of the lessor, and Ui.1less a notice to tlle Contrary by either
party has previously been given, it is understood that there is an implied new lease, not for the
period of the original contract, put for the ti-ne established in a.rticles 1682 and 1687. The other
terms of the original contract shall be revived.
Decision -10- G.R. No. 219698

its adjudication the presence of third parties over whom the court cannot
acquire jurisdiction, it must be set up t.11.erein, and will be ba..rred in the future if
not set up. 72

Contrary to the claim of PJ\i'TC and the fmding of the RTC, there would
be no unjust enrich..ment to spea,_~ of, as Time Realty withheld the properties
pu_rsuant to Paragraph 23 of the Contract of Lease, a provision which PNTC
knowin.gly agreed to. In other words, Time Realty retained the said properties
as security to compel PNTC to pay and not to 1.u1duly enrich itself. To support
this finding:

Jurisprudence holds that there is 1.m.just enrichment when a person

l)lljustly retains a benefit to the loss of anofaer, or when a person retains money
or property of a.'1.ot.'i.er against the fu,,da.mental principles of jµstice, equity and
good conscience. Tne statutory basis for t.':le principle of unjust enrichment is
Articie 22 of the Civil Code which provides that '[e]very person who through
an act of performance by a..riot.':ler, or any other means, acquires or comes into
possession of something at the expense of the latter wit,'i.out just or legal
ground, shall retu,71 the sa,'Tie to him.'

Toe principle of u..11.just enrich,_'!lent under Article 33 requires two

conditions: (l) that a person i, benefited without a valid basis or justification,
and (2) that such benefit is derived at an.other's expense or damage. There is no
unjust enrichment when t,1ie person \vho wi11 benefit has a valid ciaim to such
benefit. 73

Tne circumstances in the instant case do not show that Ti..111e Realty
unjustly benefitted from the retention of the properties without valid basis, as
it merely acted in accordar1ce with the lease contract to ensure recovery of
what is due to it. If anyt..hing, the so-called "benefit" which Time Realty is
"enioyirnz" bv witliholding the nroperties is the assurance that it would be able
.... ...,., ., £ -

to collect from PNTC. Additionally, it cannot be said that Time Realty is using
the said properties as these ·were being kept in storage pursuant to t.1-ie lease
contract.

J.U re Jat1on
T · to· trus,
· · r1
nNTC
1- ' tne
argues t11at · • actual1 values shou1
' properties·
1 · 'd
be determ.ined~ as it may already be adequate to compensate for its
accountabilities. \Vhile this may be so, a perusal of the inventories74 submitted
bv ·•pN=c
bot.ri .~ 1 - a...rH.1 i'1me r
·'"''--ealtv snows tn.at ··d
tne pro1ecre '
va1ues o .f
. 'tne
0
,· ~· · ' '
d. ., £ ,..

personal properties "vould not be e:Gough to cover an of PNlC's liabilities. In

any case, \Vhether the properties' values arc sufficient or not, it 1,vould not

72 Jntramuros Adminfsiration v. OjjSho.re; Corp£fr--uctfon. Dev,3lopnu:nt C(I.; 827 Phil. 303t 330 (2018) citing
Spouse$ Ponciano v. l-lon. Parent:;:la, 387 Phil. 62 l (2000).
73 Department cf Public Works and High~{-'ay~;;. R.qg;"a?i n·:..A ~,: Commissio;1 on Audit, GR. No. 237987,
March 19, 1019~ citing Cur Cooi Philippines. inc, v. Ushio Reo.lty & Dziielopment Corp., 515 Phil. 376,
384 (2006); ai.1.d Cabrera v; Ameco Cantractors Rental, Inc., G.R. No. 201560, June 20, 2012 (Minute
Resolution); and Government Service fn.mrancr: System v, Commission or. Audit, 694 Phil. 518, 526
(20i2).
74 Rollo, pp. 31 and 74. tb.forrunite]y~ the jnv~nt\Jrie~ of both p~nl:;,s <lo not patch. These need :fi1nher
verification during th~ ext?ct_ition of th:-3 juciginent in this ;;{t::,;t;.
 Decision GR. No. 219698

ch;;mge the fact that PN"TC owes TLme Realty. Besides, the issue of valuation
and depreciation of the pers~mal properties are matters which should be
addressed d4ring thl;l execution stage after the fin.ality of the judgment in this
.case. 75

It should be noted, tl:toug,.'1, ti'lat a§l admitted by Time Realty, P~"'TC still
has a deposit an1ounting to r'i43,640.00, 76 Notlilbly, ?i,nigraph 1 (Deposit) 77 of
the Contract of Lease expressly provides that "[t]he deposit shall be forfeited
in favor of [Time Realty], &h9uld [PNTC] fa;il to c9n~uµ-.rnate 1hi;; fb.11 term of
this contract, or upon violation of ?.ny of the terms of this contract." 78
Although the contract indicated that the deposit w01.1ld be forfeited in favor of
Time Realty, it did not specifically prohibit the application oftl:te same deposit
to rental arrears or to any other monetar; liability of PJ\1TC. 79 The deposit,
1l1erefore, should be deducted from the total figure which PNTC has to pa,y
Time Realty during the execution stage.

In connection with this, the leise contri,ct f;tat1;s that PNTC's deposit
sllquld be ?739,200.00 or equiviiJent to tvvo (2) months' rental of the leas:;:d
premises to answer fur any of its obligations uqder t.½e contract. Curiously,
tl1ere is an a."Tiount of P4,440,0Q µn~cou..'lted for i.11 t.½.e deposit, since Time
Realty did not clarify why there is a difference betvveen M43,640.00 (Pl\.'TC's
deposit as indicated in Time Re11lty'i; Answer w.!th Counterclaim.) and
P739,200.00 (t.'le an1.oµn,t indicated in the Contract of Lease regarding t.he
deposit). Additionally, lime Realty did not explain t.11.e discn~pari.cy, wh$ther it
was due to tb~ in9re<1:;,e in rentals 9r nQt. Ergg, th? entire deposit of
t-74:3,640.00, which TiinfJ Re?.lty ad.'Uitted, shon 1d be the figure considered,
. .

On a different blJt rel!it@d matter, Time R;,::alty claims that PNTC should
reirnburse it for the repairs of the fourth floor, as t.li;:, latter vacl'!.ted, the
premises without retu,,.'11ing t4e sam<:, in g9od 9ondition considering ordinar;
wear and tear, imd in violation of t.11e lease contract. 80 Tim.e Realty listed the
following observations:

a Th~ vinyl fiootjn~, floqr W."'1d w@ll [t-i.les] ~re d?~troy~d;

b. Door knobs were d.ismar1tled ~11d carted &'h·ay;
c. Fire exit doors, pl:y•,,,vood pai---titton5:'. G.:~d cubic1~ doors at t.¾e comfort rooin
are destroyed or in a state of disrepair;
ct Comfort rOom.s ari 9loggid;
e. Lav~tory, water closet, "it comfort rooms ~e either de~~oye{J or in ~ ~tate of
disrepair; ligbJip.g fixtures, light switc.hes &Jld oµtlet;s were remov~d ai7.d/or
["""ed .,,,,Q· ;. s1
,.,.~.,-- a.v1=Y,
. . .

-;,~ Eook1i'g}1;, Jnc. v. Tiu, G.R. f·JQ. 2qoso, Jw1? i?, 20j9·d~~r,g RULES OP COURT, Ruh; 39, S:tictkm 1.
76 Rollo, p. 40,
n Id..ru:211.
;s Id.
Decision ~12- G.R. No. 219698

A scrutiny of the record:, reve,µs that PNTC failed to demonstrate t.¾at the
dire condition
·- . of t.11.e. fourth
. ~·
- floor. was not due
. . to
. . its
.•. o,vn
. .
., actions.
.
. It. should
..
. be. ., . "•, . ' . .

noted th.at PN1C 9ccupied the premises for more than two years, 8"-"ld it did not
$how any proof t,1iat durin~ me sajd period, it reported issues with the doom,
floors, lighting, rest rooms and ,.veter sour?~~ to th~ ~-~11inistr;;t9r of the
building. Ihm,, there is an .i.ssumption that PNTC's personx1el initially
occupied t.,lie premises in tenai1table con4ition and t.11.at, ovEJr time, their
employees or their agents caused the state of disrepair due to poor
maintenance. 82

Since \Ve have e$tablisheq. that PNTC is liable for rentB,l arresrrs, s<;rvice
chwges and the repair oft;.½e premises, We now move on to the computation of
t.lJ.e
- sums' due to Time Reali:";'.
- , '" . -· this... it is important
. ... . In line with ~ . . - to mention t.liat
. . ~ ' , __ -

Time Realty did not dispute or move for the modification of the awB,r<ls given
by the CA in its favor. The figures were based on the Statement ofAccount83
which Time Rei;tlty itself submitt~d, pertaining to PNTC's rental arrears ai,.d
utility charges for the months of Ivfarch a."ld April 2007. Thus, the said.
a.mounts, P870,038.40 for rentµ arrears and !'340,090.4-B for utilities, should
be maintained as th9 prin91pi:'!,l fig!,in:is [Qr the purpose qf the imposition of tb.e
interests. Additionally, the reimbursement amou,."lti..rig to ?5,095,822,34 fort.lie
restoration of the leased premi,;.,s should be t:;i.ken into account. Also, as
previously mentioned, Pl',;'TC's deposit of ?743,640.00 ~hould be dedµcted in
the total amount
. . of its accountabilities.
. .- .
, -

As regard~ the interest on unpaid rent;tls, Time Realty prays that an

interest of t1'.ree percent (3 % ) per month (on ::L'\Y amount due and not paid on
time) should be b:npos<;:d from f'.1ay 2007 until full p,;,ym(jlnt pµrslla.'1t to the
lea'.:le contra9t. 84 V./e disagn:e. It is tnJe that according tp Paragraph 1 (Amount
of Rent) of the Contrijci of Lea~e~ :.'[w)it.1iout pre)udio~ to·· the exercis~ by
[.Time Realty] of its rights .
und!;:)r Paragraph 24 herein, [PNTC] shall pay to. .

[Time Realty] a.ri int';'lrest at the rate of three (3) per cent a month on any
amollllt due and not paid on time, to be computed per number of days delayed
over friirty (30) days from the date of delinquency, which is from the 5th of
eac_h and__ ev~ry mont.i:· ' "'85 H-:owever, 1t
. 1s
· a1so
' trµe tnat
' trhe rr:npos1tion
. . . o.f an
interest on u...ri.paid rentals cont<1.ined in tl:w sa.id provision takes t.~e nature of a
penalty clause, in caSe PNTC breaches any of the stipulations in the lease
contract. \Vithal., evr;,n if such was spl'Jdfied in the contrgct, public morals and
policy dictate that the interest rate should still be reasonable and equitable.
Jmjsprudence teaches that:

T .,f•
1.:P. ~
. .Jg'dta.n "? court oJ ~'1ppe.f!,!S, v,e ne1,...
0
·' "ct that
• - ~ .penqity
• 1 '
Q1~4se, '
_expr~ss1y
recognized by la~v, i~ &"'1 accessory Ui-1-4€;!":uiking t9 a~s~© gr~ater li§.Pility on
the part of an obliger in case of breach cf &+'1 ·obligati9n.. It fu...rictionf? to
·stren~hen ti½e ·coercive force of the obligatjotl ac.7.d to prov~4~, ~Jl ~ff~ct, for

82
See: CIVIL CODE, Arts. 1Ql 0. ar..d 1911.
83
Rollo, P- 7~.
84 Id. a,t 43.
ss Id.
 D~cision -13- G.R. No. 219698

what could be the liquidated daniages resulting from such a breach. The obligor
would then be bound to pay the stipulated indemnity wit.1-iout the necessity of
proof on the existenc.;e !l-llcl on the measure of damages caused by the brea,ch.
Although a court is not at liberty to ignore the freedom of the pa.-ties to agree
on such t~s ioJild conditions as they see fit that contravene neither law nor
morals, good customs, public order or public policy, a stipulated penalty,
nevertheless, may be equitably redllced by the courts if it is iniquitous or
unconscionable or if the pdncipal obligation has been partly or irreguiarly
complied with.

Pertinently, Article 1229 of the Civil Code states:

A.rt. 1229. The judge shall equitably reduce foe penalty when the
prin.cipal obligation has been partly or irregularly complied with. by
the debtor. Even if there has been no P!erformance, foe penalty may
also be reduced by the courts if it is iniquitous or unconscionable.

In exercising 1iris power to determine what is iniquitous at,d unconscionable,

courts must consider foe circumstances of each case since what may be
iniquitous and u,.,conscionable in one may be totally just and equitable in
anofr1er. 86

In light of this, the Co11rt deems the penalty charge of 3% per month for
u..11pi,.id rentals unconscionabie, 87 especially considering that PNTC only failed
to pay when it was already clear'mg out of the premises. Thence, V-/e find it
equitable to reduce th.e interest rate from 3% to 1% per month or a total of
12% per annum 88 in accordance with Article 122989 of the Civil Code. As
sµch, the a..'Tiount of P870,038.40 should be subject to the interest rate of 1%
per month or 12% per annum counting from May 2007 tmtil full payment.

With regard to the service charges, Time Realty prays for the imposition
of the legal interest from l\1ay 2007 until full payment. 90 Given that these
charges do not constitute as a loan or forbearai.,ce of money, tr'ie applicable
legal interest should be six percent ( 6%) per annum from the time of judicial
demand, 91 or t.1i.e dat@ when Time Realty filed its A..,swer wit.½. Counterclaim
on January 7, 2008. 92

86
Bio-Research, Inc, v. Univille Deve!Qpmenr Corporarion, supra note 79; citin.g I.,igutan v. Court of
Appeals, 427 Phil. 42, 42,55 (2002) and imperial v. Jaucian, 471 Phil. 42 (2005).
87
ld. citing the following: In lY!CAfP Construction Corp. v. fdonark Equipment Corp,, !46 Phil. 383, 393
(2014), we held that the pen~}ty charg~ of 2% p~r month is 1.mconscionable. Simila,rly, in Pentacapital
Investment Corporation v. J;;fahinay, 637 Phil. 283,304 (2010) we hel4 that the penalty charge of3% per
month is u,nconscionable and reduced it accordingly.
38
Mondragon international Philippines, Inc. v. l)nion Bank q{the Philippines, G.R. No. 228530, January 21,
2019.
89
Art. 1229. The judge shaH equitably r~d11ce t.h~ penalty when the prinClpaJ obiigaticn has been partly or
irregularly complied with by the debtor. Even if th~e has been no perfonnan9e, the p~malty may also be
1:1edue:ect by the courts if it is iniquitous or unconscionable.
90
1tol!o, pp. 41-42.
91
Jt/issan Gallery-Ortigas v. Fellpe, 120 Phil. 828, 84(} (2013t citing ]Vacar ,✓. Gallery Frames., 716 Phil.
267, 281 ..283 ('.:Wl3) which dtect BSP,,,MB Circular No. 799 dated May 16, 2013.
92
Rollo, p. 35.
 Decision -14- G.R. No. 219698

Regarding attorney's fees, Paragraph 24 (Judicial Relief and Penalty) of

the Contract of Lease provides:

Should [Time Realty] b., compelled to seek judicial rdief against

[PNTC], th() latter shall, in a.ddition to the damages mi\'ntioned in [paragraph
23], pay an amount eq1.1ival~nt to 20% of the amount, claimed in the complaint,
but in no case less than Pl0,000.00 as littgmey's foes aside from tr,.e costs of the
litigation and other expens(!s which the )aw may i)ntitle [Time Realt-y] to
recover from [P:t-.JTC].

Provisions of a nenal character in t.'le ot.her sections of this contract shall

be considered as cumclative to t.1-ie relief gra.,,ted by ·this secti~n. 93

$ased on t'le foregoing, in calculating for the attorney's fees, twenty

percent (20%) of the amounts claimed in Time Realty's counterclaims should
be computed, which in all cases should not be less than Pl0,000.00. In its
countercla,im, Time Re11ity aske4 for the paym!;)nt of l"977,3 l 4.46 (or t.½.e
remainder thereof after applil;;ation of PNTC's deposit) for unpaid rentals
4'1cluding E-VAT <Ul.d swcharge$ for lat11 p1;1.yment of previous rentals.
How©ver, it only presented sufficient proof for tla.e a.mount of r870,038.40 as
reflected in t.½.e Statem,ent of Account, 94 whfoh the CA actually awarded and
which Time Realty no longer qµestioned, For purposes of illustration, let Us
assume that the deposit of PN1C amounting to ?743,640.00, when subtracted
from the amount of f879,Q38.40, yields th~ re/Jlain4er of 'i:'!126,398.40. This
should be added to the claimed ai:uount of ?340,090.48 for service charges as
well as '?5,095,82234 for the cost of restoration of the premises. The tqtai
would be fS,$62,311.22, io'¾ of wJ;,Jch yiel(),s '!'""l,llZi"l-62.24, repre~ents
attorney's fees pursuant to Paragraph 24 of the Contract of Lease.

Notwitb.sta.nding this, We should consider that Time Realty, in its

Answer wit.½. Countf;)rclaim, only praysJd for Pl00,0QQ.Q0 as attomey':l fee~. 95
Likewise, Time Realty diet not expr-?~sly ?.ppeal the awa,xd of the CA of
Pl00,000.0Q i..n attorney's fees in its favor. To stress, Time Realty did not file
its criNn motion for reconsi~.eration b~fQr-e the CA or itq O\VTI. petition before
this Court in ord1;r to question the specific amount ofth.e award for attorney's
fees. It 111erely filed a Com..111ent on PNTC 1 ~ motion for r~consideration before
• {"' A~ 11
u-1e ~✓1-1..~ TD1!0W~ d .by ?,notner
' Com1ne:nt on r::
~1'.'T,..,, • . . • ' . .
.J _._ ~ $ rn~tant pebt1on~ \v.nere!n 1t

(Time Realty) suddenly mentioned Parawaph 24 of th.('l Co11trict of Lease as

•
th~ , •
omsit3 .I". •
i.or 1ts ·1ement !O
~ntit. . attorµ~y
. ' s ree~
r "h
'Vv1t:~cru:t fi , 1 •
'.'."urtner ~xp_t;EL11.at1on or
.
VOffil:HJtqtlon.. · ~nn.p l.y pu.t, "llf'.D.~
96 ,.,. ~- lR ea1ty·s
, . Comments
"' ¥Jere on_y1 " respong~$,,. to
~,.,~~, . _, ,. b , +' i. · . • . , . , - •
Yi'!il l L s motion 341a pet1t1on, · ctn o""- v1-n1ch. c2.µnqt b~ cons1c©r~g. ijs q. ae:tir:ute
' . . .. - h . . - .. . f, • .L "th
or d1rect reqv.est to r.uo~1fy ti1e &'-":/~IO. tor tittomey's ... ees 1n accor\.4mce w1 - l-
Parairaph 24 of the Contract qf Lease.

93
1d. at 52.
Q4 IO.. ~t 78:.
9 ::i kL at 42.
9~' ld. at 262::-263. -
 Decision -15- GR. No. 219698

Indeed, "[s]ettled is the rule that an issue not properly raised on appeal
constitutes a waiver of that issue on appeal, which precludes the Court from
acquiring jurisdiction to review a,_,.d alter judgment. An appellee who has not
himself appealed cannot obtain from the appellate court any affi...'1.llative relief
other than those granted in the decision of the court below." 97 Considering that
Time Realty did not itself contest the amount of Pl 00,000.00, the said figure is
already final and binding upon it. 98 In any case, this amount is still higher than
the minimum of Pl 0,000.00 as provided by Paragraph 24 of the Contract of
Lease.

Given that the Court has discussed the computation of the sums due to
Time Realty which PNTC has the obligation to pay, the ruling of the CA
should accordingly be modified with respect to the amounts and interests
applicable for each category of liability. Moreover, once the judgment in this
case becomes final and executory, all the monetary awards in favor of Time
Realty shall be subject to legal interest at the rate of 6% per annum from such
finality until its full satisfaction.99

WHEREFORE, the instant petition is hereby DENIED. Tne assailed

Decision dated April 8, 2014 and Resolution dated Iv1arch 26, 2015 rendered
by the Court of Appeals in CA-GR. CV No. 97119 are hereby AFFIRL'1ED
with MODIFICATIONS in that PNTC Colleges, Inc. is ORDERED to pay
Time Realty, Inc. the follovnng amounts, less the deposit mnounting to
P743,640.00:

1. f'870,038.40 for unpaid rentals, wit.1-i an interest rate of 1% per

month or 12% per annum computed from May 2007 until finality of
this Decision;
2. f':340,090.48 for unpaid utilities (electricity and water service
charges) with an interest rate of 6% per annum from January 7, 2008
until finality of this Decision;
3. i'S,095,822.34 for the cost of the restoration of the leased premises
with an interest rate of 6% per annum from the date of finality of this
Decision until full payment;
4. Pl00,000.00 for attorney's fees; an.cl,
5. t.11.e sum of the amounts in numbers l to 2 herein, with interest at the
rate of 6% per annum from finality of this Decision until full
payment.

97 Mondragon International Philippines, Inc. v. Union Bank of the Philtppines, supra note 88, citing
Hiponia-Mayuga v. MBTC. 761 Phii. 521, 530 (2015), and Javines v, XLibris, GR. No. 21430i, June 7,
2017, 826 SCRA640, 647.
98
Manese v. Jollibee Foods Corp., 697 Phil. 3;:!2 (2012).
99
Rollo, pp. 4 i -42.
Decision -16- G.R. No. 219698

SO ORDERED.

WE CONCUR:

ESTELA Mt~ERNABE
Senior Associate Justice
Chairperson

HE S~~e:~G~
Associate Justice

Associate Justice
Decision -17- G.R. No. 219698

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ESTELA M. ~~ERNABE
Senior Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson's Attestation, I hereby certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned
to the writer of the opinion of the Court's Division.