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Republic of the Philippines The first basic monthly rental shall be

SUPREME COURT paid in advance to the LESSOR on or


Manila before December 1, 1980. Succeeding
basic monthly rentals starting March,
THIRD DIVISION 1981 be paid by LESSEE to LESSOR,
without the necessity of a previous
demand or the services of a collector,
G.R. No. 79642 July 5, 1993
within the first five (5) days of the month
BROADWAY CENTRUM CONDOMINIUM to which said rental shall correspond, at
CORPORATION, petitioner, the Office of the LESSOR at Broadway
vs. Centrum.
TROPICAL HUT FOOD MARKET, INC. and
During the first year of the lessor-lessee
THE HONORABLE COURT OF APPEALS,
relationship between Broadway and Tropical,
respondents.
no problems were apparently experienced by
Gozon, Berenguer, Fernandez & Defensor Law either of them. On 5 February 1982, however,
Offices for petitioner. Tropical wrote to Broadway stating that
Romulo, Mabanta, Buenaventura, Sayoc & Tropical's rental payments to Broadway were
Delos Angeles Law Office for respondent. equivalent to 7.31% of Tropical's actual sales of
P17,246,103.00 in 1981, while "[Tropical's]
gross profit, rate [was] only 10%." Tropical
FELICIANO, J.: went on to say that the rental specified in that
contract had been "based merely on
Petitioner Broadway Centrum Condominium
[Tropical's) projections that [Tropical] could
Corporation ("Broadway") and private
reach an average sale of P120,000.00 a day;"
respondent Tropical Hut Food Market. Inc.
however, Tropical's total sales projection for
("Tropical") executed an 28 November 1980 a
1982 was only P23,000,000.00. This would
contract of lease. Broadway, as lessor, agreed
mean again a rental rate of 6.08% of sales
to lease a 3,042.19 square meter portion of the
"which is too high for Tropical Hut-Broadway
Broadway Centrum Commercial Complex for a
considering that the present rental rates of
period of ten (10) years, commencing from 1
other Tropical branches are even below the
February 1981 and expiring on 1 February
normal rate of 1.5% on sales." Accordingly.
1991, "renewable for a like period upon the
Tropical made the following proposal to
mutual agreement of both parties." The rental
Broadway:
provision of this contract reads as follows:
[Tropical] would therefore propose to
3. BASIC RENTAL ON LEASED PREMISES
reduce the present monthly rental to
— LESSEE agrees to pay LESSOR a basic
P50,000.00 or 2.0% of their monthly
monthly rental on the leased promises in
sales whichever is higher, up to the end
the amount of ONE HUNDRED TWENTY
of the third year after which it shall again
THOUSAND PESOS (P120,000.00)
be subject to renegotiations. (Emphasis
Philippine Currency, during the first three
supplied)
(3) years of this lease contract from
February 1, 1981 to February 1, 1984, On 4 March 1962, Broadway responded to
allowing two (2) months grace period on Tropical's latter by stating that it (Broadway)
rental for renovation/improvements on believed that the problems of Tropical's
the leased promises from December 1, supermarket in the Broadway Centrum were
1980 to January 31. 1961. The basic within the control of Tropical's management.
rental shall be increased to ONE Broadway offered six (6) suggestions which, if
HUNDRED FORTY THOUSAND PESOS implemented, should result in increased sales
(P140,000.00) per month during the next for Tropical of at least 15% in the succeeding
three (3) years from February 1, 1984 to months. In the meantime, Broadway made the
February 1, 1987, and ONE HUNDRED following counter-proposal consisting of
SIXTY FIVE THOUSAND PESOS conditional reduction of the stipulated rental by
(P165,000.00) per month during the last P20,000.00 for a limited period of four (4)
four (4) years from February 1, 1967 to months:
February 1, 1991.
. . . Meantime, we are agreeable to a Provisional arrangement should not be
conditional reduction of your rental by interpreted as amendment to the lease
P20,000.00 per month for four months contract entered into between us.
starting this month on a trial basis; that We invite your attention to the fact that,
is, the P20,000.00 per month reduction as agreed upon, you have committed to
in rental will be paid back to us and return by the end of April a certain
spread over the last six months of the portion of your leased premises totalling
years should the target of 15% increase 466.56 square meters and presently
in sales be achieved by the fourth occupied by your drug store and coffee
month. However, should your sales not shop outlets and half of the hallway.
increased by 5% in spite of the
improvements you have introduced, the Finally we wish to remind you that the
reduction in rental of P20,000.00 per temporary alteration in rental is
month of P80,000.00 for four months will conditioned on your good faith
not have to be paid anymore. In other implementation an the suggestions we
words, the monthly reduction in rental is conveyed to you in our letter of March 4,
conditioned upon your not achieving the 1982 regarding the operations of the
desired 15% increased in sales volume supermarket and shall not commence
by the fourth month assuming you until the area mentioned above to be
implement all of the above changes. surrendered is actually surrendered.
It is understood, however, that any Should you find the foregoing in
reduction in rental extended is merely a accordance with our previous verbal
temporary suspension of the original agreement, please signify your
rate of rental stipulated in our contract of acceptance by signing above the word
lease and not an amendment thereto. 2 "conforme."
(Emphases supplied) Thank you for your, continued
Officers of Tropical met with the President of patronage.
Broadway and during this conference, C o n f o r m e:
Tropical's officers recounted the "low sales Very, truly
volume" that the Tropical Supermarket in the yours,
Broadway Centrum was experiencing,
Tropical Hut
apparently as a result of the temporary closure
Food Broadway
of Doña Juana Rodriguez Avenue. 3 This Avenue
Centrum
is a major thoroughfare adjacent to the
Market, Inc.
Broadway Centrum and was then closed to
Condominium
vehicular traffic because of the road expansion
Corp.
project of the Government. Broadway's
4
President, Mrs. Cita Fernandez Orosa, was By: (Signed) By: (Signed)
aware that the temporary closure of the Doña ___________________
Juana Rodriguez Avenue had affected the _____________________
business of all the Broadway's tenants, (Emphasis supplied).
including Tropical. She, therefore, agreed on 20 Months later, the road expansion project at the
April 1982 to a "provisional and temporary Doña Juana Rodriguez Avenue was completed.
agreement" which agreement needs to be By a letter dated 15 December 1982,
quoted in full: addressed to Tropical, Broadway referred to the
Further to our letter dated April 6, 1982, rental which "as of last, April 20, 1982, was
we hereby make formal our provisional provisionally reduced" to P60,000.00 a month
and temporary agreement to a reduction or 2% of gross receipts whichever is higher
of your monthly rental on the basis of 2% "without waving any of [Broadway's] rights
of gross receipts or P60,000.00 under our rental agreement." Broadway then
whichever is higher. Gross receipts went on to say that:
should be construed as the total sales After careful deliberation, we regret that
and receipts from sublessees of your this concession can no longer be
area and from whatever source arising extended in its present form. We,
from the area leased by you. This
therefore, advising that we shall increase your losses last year by agreeing to a
the monthly rental to P100,000.00. temporary reduction of your monthly
This increase, however, shall be rental. However, as we have stated in
implemented gradually as follows: our December 15, 1982 letter, this
P80,000.00 effective January, 1983 and concession can no longer be extended in
P100,000.00 effective April, 1993 until its present form which continues to be a
further notice. considerable reduction on the provisions
of our existing long term contract.
Considering the fact that you collect a Consequently, we have to reiterate our
monthly gross rental of P24,600.00 from advise on you regarding your rental
your concessionaires (other forms of increased. 6 (Emphasis supplied).
income not considered), the previous
temporary arrangement afforded you Tropical continued its renegotiation efforts. In
mare than sufficient respite from another letter dated 29 March 1983,
whatever business constraints you may Broadway's President wrote to Mr. Luis Que
have had then. The consequent effect of turning down his request for reconsideration.
said temporary arrangement is your Broadway, however, was evidently desirous of
payment of a monthly rental of keeping Tropical as a tenant if possible and so
P35,400.00 or an effective rate of P14.32 stated that the P100,000.00 monthly rental
only per square mater. We are sure that would begin, not on April 1983 as stated in its
you will agree with us that this rate is letter of 15 December 1982 but rather on July
very low and cannot therefore be 1983. By a letter, dated 9 April 1983, the Credit
sustained indefinitely. 5 (Emphases and Collection Officer of Broadway sent Mr. Luis
supplied). Que a bill for P81,320.00 representing the
accrued differential of P20,000.00 per month
While the rental rate above fixed by Broadway between the rental which Broadway was willing
was higher than that set out in the provisional to grant to Tropical (P80,000.00 per month
and temporary agreement of the parties of 20 starting 1 January, 1983) and up to 30 June
April 1982, the rates so fixed were nonetheless 1983)and the P60,000.00 per month or 2% of
lower than that stipulated in their contract of gross receipts whichever is higher, under the
28 November 1980. Tropical, however, was not temporary and provisional letter-agreement of
satisfied with the adjusted rates fixed by 20 April 1982.
Broadway. In a letter dated 4 January 1983, Mr.
Luis Que of Tropical wrote to Broadway's Tropical responded to the statement of account
President appealing to Broadway "to fix our sent by Broadway by pleading, once more, in a
monthly rental at P60,000.00 or 2% of our letter dated 15 April 1983, that Tropical's
gross receipts whichever is higher." In this present rentals of P60,000.00 monthly or 2% of
letter, Mr. Que expressly hoped that gross receipts, whichever is higher, "would at
least stay until we have somehow recovered,"
[Broadway would] understand our to which Tropical proposed, however, to add
position, and may we reiterate our 20% of its income from concessionaires (i.e.,
appeal to maintain our present concessionaires at Tropical-Broadway
provisional rates until such time that Supermarket). 7
more sales are achieved. (Emphasis
supplied) Tropical's last counter-offer was not acceptable
to Broadway. In a letter dated 22 April 1983,
Mr. Luis Que's appeal was, however, found Broadway's President wrote to Mr. Luis Que
unsatisfactory by Broadway. In a letter dated stating that "the matter was no longer
13 January 1983, Broadway said: negotiable":
We are replying to your letter of January We are responding to your letter of April
4, 1983. While it may be admitted that 15, 1983 proposing a counter offer to the
you are incurring losses in your payment of your rentals. You will
operations, the same is not a monopoly remember that in our last meeting our
experienced solely by your corporation. position on the matter has been
Broadway Centrum itself has had its unequivocably stated. The temporary
share of business setbacks but we have arrangement of reducing your monthly
nevertheless decided to absorb part of rentals was extended as an assistance.
This had caused us to lose P620,000.00 amendment to the lease contract and
on rental income. this was done merely as an assistance.
You will agree that this is a sizeable There is, therefore, absolutely no basis
amount which had tremendous adverse to your claim that we cannot arbitrarily
effects on our financial position. This can and unilaterally increase the rentals. We
no longer be sustained. strongly feel that we should have instead
been the recipient an act of gratitude
We reiterate, therefore, that the matter from you.
is no longer negotiable and we strongly
urge you to settle your obligation to In view therefore of your obstinate
minimize the 2% penalty on delayed decision to blur your view and continue
payments provided for in our contract. refusing to heed our demands, we are
hereby formally serving you notice that if
We trust that you will see the merits of you still fail to pay your back accounts
the foregoing. 8 (Emphasis supplied). amounting to P100,000.00 exclusive of
On 5 May 1983, Mr. Mariano Gue, adopting a penalty charges by Monday, May 9,
new and much harder posture than Mr. Luis 1983, paragraph five (5) of our lease
Que had, wrote to Broadway as follows: contract will be implemented. 10
(Emphasis supplied).
. . . I could only confirm what I told you in
our conference that we cannot afford A week later, on 12 May 1983, Tropical filed a
any increase in rentals in the space Complaint before the Regional Trial Court,
occupied by us at Broadway Centrum. Quezon City, seeking a restraining order or
And I could only repeat what is contained preliminary injunction to prevent Broadway
in the letter sent you by our Mr. Luis Que from invoking and implementing Section 5 of
dated April 15, 1983. We cannot agree their Lease Contract and asking the court to
to an increase in rentals at this time. To decree that the, rental provided for in the
do so would put us in a financial situation letter-agreement of 20 April 1982 "should
worse then we were in before we agreed subsist while the low volume of sales [of
to reduce the leased premises and adjust Tropical] still continues." A restraining order
the rentals. Our position is that you was issued by the trial court ex parte the next
cannot arbitrarily and unilaterally day and a preliminary injunction was granted
increase the rentals. This is a matter on 2 June 1983, upon Tropical's filing of a bond
which should be mutually agreed upon in the amount of P100,000.00.
by us and as stated, we are not in a On 6 January 1984, while trial before the
financial position to agree to such an Regional Trial Court was pending, Broadway
increase. 9 (Emphasis supplied). informed Tropical that the basic rental would
On the same day, 5 May 1983, Mrs. Orosa be increased to P140,000.00 per month during
wrote to Mr. Mariano Que expressing shock and the next three (3) years from 1 February 1984
dismay at the posture suddenly adopted by the to 1 February 1987 in accordance with
latter. Mrs. Orosa wrote: paragraph (3) of the Lease Contract dated 28
November 1980.
We are replying to your letter of May 5,
1983 categorically stating that your Tropical reacted by filing a supplemental
position is that we cannot arbitrarily and complaint with the trial court raising for the
unilaterally increase the rentals. We are first time the issue of whether or not the letter-
appealed by the apparent attempt to agreement dated 20 April 1982 had novated
distort the very crystal clear the Lease Contract of 28 November 1980.
arrangement we reached last April 20, Tropical alleged that the original Contract. of
1982 anent the temporary alteration of Lease had been novated in its principal
your rentals. We hereby attached a conditions — i.e., the area subject to the lease
xerox copy of said agreement with our and the lease rentals — by the letter-
underscores to refresh your memory. agreement dated 20 April 1982 and that the
reduced lease rates set out in the letter-
We have exhaustively, repeatedly but
agreement are to subsist while Tropical's sales
patiently labored to explain to you the
volume "remains low."
temporary and provisional arrangement
to reduce your monthly rentals is not
Petitioner, upon the other hand, vehemently leased space by 466.56 square meters,
denied that the original Lease Contract had possession of which was returned by Tropical to
been novated by the letter-agreement of 20 Broadway, constituted valuable consideration
April 1982. for the reduction of rentals while the "low sales
In time, the trial court rendered its decision volume" of Tropical continued. The Court of
dated 14 March 1985, the dispositive portion of Appeals corrected a microscopic arithmetical
which reads as follows: error committed by the trial court and in effect
directed Tropical to pay, when its "low sales
WHEREFORE, judgment, is hereby volume" shall hove been overcome, the
rendered in favor of the plaintiff and following rental rates:
against the defendant as follows:
From 1 February 1984 up to 1 February
1. The writ of preliminary injunction 1987 — P118.529.15 per month;
previously issued is made permanent;
From 1 February 1987 up to 1 February
2. The reduced rental provided for in the 1991 — P139,695.07 per month.
letter-agreement of April 20, 1982 (Exh.
"G" or "5") shall subsist or be effective Petitioner Broadway now asks us to review and
during the period that a plaintiff cannot set aside the Decision of the Court of Appeals.
achieve its Projected daily sales average The sole issue confronting us here is Whether
as envisioned in its feasibility study; or not the latter-agreement dated 20 April 1982
3. The contract of leased dated had novated the Contract of Lease of 28
November 28, 1980 (Exh. "A" or "1") is November 1980.
declared as partially novated or modified We start with the basic conception that
by the letter-agreement; novation is the extinguishment of an obligation
4. The amount of monthly rentals by the substitution of that obligation with a
payable by plaintiff for the reduced area subsequent one, which terminates it, either by
of the leased promises after plaintiff has changing its object or principal conditions or by
achieved its projected daily sales substituting a now debtor in place of the old
average is fixed as follows: one, or by subrogating a third person to the
rights of the creditor. 12 Novation through a
February 1, 1981 to February 1, change of the object or principal conditions of
1984 — an existing obligation is referred to as objective
P39.45 per square meter or (or real) novation. Novation by the change of
P101,609.00; either the person of the debtor or of the
February 1, 1984 to February 1, creditor is described as subjective (or personal)
1987 — novation. Novation may also be objective and
P46.02 per square meter or subjective (mixed) at the same time. In both
P118.530.00; objective and subjective novation, a dual
purpose is achieved — an obligation in
February 1, 1987 to February 1,
extinguished and a news one is created In lieu
1991 —
thereof. 13
P54.24 per square mater or
P139,702.00. If objective novation is to take place, it is
essential that the new obligation expressly
Correspondingly, defendant's
declare that the old obligation to be
counterclaim is dismissed.
extinguished, or that now obligation be on
Costs against the defendant. every point incompatible with the old one. 14
So Ordered. 11
(Emphasis supplied). Novation is never presumed; it must be
established either by the discharge of use old
On appeal, the Court of Appeals affirmed the debt by the express terms of the new
decision of the trial court. The Court of Appeals agreement, or by the acts of the parties whose
held that the letter-agreement dated 20 April intention to dissolve the old obligation as a
1982 had novated the principal conditions of consideration of the emergence of the new one
the Lease Contract. The Court of Appeals also must be clearly manifested. 15 It is hardly
hold that the reduction in the rentals was not necessary to add that the role that novation is
entirely a gratuitous accommodation on the never presumed, is not avoided by merely
part of Broadway since the reduction of the
referring to partial novation. The will to novate, hereof shall not be deemed a
whether totally or partially, must appear by relinquishment or waiver of any right or
express agreement of the parties, by their acts remedy that said LESSOR may have, nor
which are too clear and unequivocal to be shall it be construed as a waiver of any
mistaken. subsequent breach of, or default in the
Applying the above principles to the case at terms, conditions and covenants hereof,
bar, it is entirely clear to the court that the which terms, conditions and covenants
letter-agreement of 20 April 1992 did not shall continue under this Contract and
extinguish or alter the obligations of shall be deemed to have been made
respondent Tropical and the rights of petitioner unless express in writing and signed by
Broadway under their lease contract dated 28 the LESSOR. 16 (Emphasis supplied).
November 1980. In the third place, the course of negotiations
In the first place, the letter-agreement of 20 between Broadway and Tropical before the
April 1982 was, by its own terms, a " execution of their letter-agreement of 20 April
provisional and temporary agreement to a 1982, quite clearly indicated that what they
reduction of [Tropical's] monthly rental —." The were negotiating was a temporary and
letter-agreement, as noted earlier, also provisional reduction of rentals. Thus, Tropical
contained the following sentence: itself, in its letter to Broadway dated 5 February
1982, quoted earlier, had proposed reduction of
This provisional agreement should not rentals from the stipulated contractual rates to
be interpreted as amendment to the P50,000.00 per month or 2% of monthly sales,
contract entered into by us. whichever is higher, "up to the end of the third
The same letter also referred to the reduction year after which it shall again subject, to
of rental as a "temporary alteration in rental" renegotiation."
which was "conditioned" upon good faith Any reduction in rental extended is
implementation by Tropical of the six (6) merely a temporary suspension of the
principal suggestions Broadway had conveyed original rate of rental stipulated in our
to Tropical concerning improvement of the contract of lease and not an amendment
operations of Tropical's supermarket at the thereto.
Broadway Centrum. The non-specification by
Broadway (who had prepared the letter- In the fourth place, the course of discussions
agreement an which Tropical placed its between Broadway and Tropical, as disclosed in
conforme) of the period of time during which their correspondence, after execution of the 20
the reduced rentals would remain in effect, April 1982 letter-agreement, shows that the
only meant that Broadway retained for itself reduction of rentals agreed upon in the letter-
the discretionary right to return to the originalagreement was not to persist, for the rest of
contractual rates of rental whenever Broadway the life of the ten (10)-year Contract of Lease.
felt it appropriate to do so. There is nothing inThat correspondence is bereft of any, sign of
the text of the 20 April 1982 letter-agreement mutual agreement or recognition that the
to suggest that the reduced concessional rental reduced rentals had so permanently replaced
rates could not be terminated Broadway the contract stipulations on rentals as to have
without the consent of Tropical. become immune to change save by common
consent of Tropical and Broadway. Quite the
In the second place, the formal notarized Lease contrary. In Broadway's letter to Tropical dated
Contract of 28 November 1980 made it clear 15 December 1982, Mrs. Orosa referred to the
that a temporary and provisional concessional letter-agreement of 20 April 1982 which
reduction of rentals which Broadway might "provisionally reduced to P60,000.00 a month
grant to Tropical was not to be construed as or 2% of [Tropical's] gross receipts, whichever
alteration or waiver of any; of the terms of the is higher, without waiving any of our right
Lease Contract itself. That Lease Contract under our rental agreement." This 15
provided, among other things, as follows: December 1982 letter, quoted earlier, in an
32. NON-WAIVER OF CONDITIONS & obvious effort to be conciliatory, did not try to
COVENANTS — The failure of the LESSOR go back immediately to the contract stipulation
to insist upon strict performance of any of P120,000.00 monthly rental, from 1 February
of the terms, conditions and stipulation 1981 to 1 February 1984. Instead, Broadway
proposed P80,000.00 per month effective
January 1983 and P100 000.00 per month their 28 November 1980 Contract of Lease.
effective April 1983 "until further notice." In its That feasibility study was no mare than an
reply letter of 4 January 1983, Tropical expression of Tropical's own expectations when
appealed to Broadway to maintain "our present it entered into the 1980 Contract of Lease; yet
provisional rates until such time that more the trial court held that the reduced rentals
sales are achieved." In its rejoinder of 13 were to remain in effect until Tropical achieved
January 1983, Broadway stressed that though it its own expectations concerning its sales at the
had its own share of business set backs, it had Broadway Centrum, which presumably were
"nevertheless decided to absorb part of not "low."
[Tropical-Broadway Centrum's] losses last year Tropical, in its Memorandum, stressed that
by agreeing to a temporary reduction of the Broadway had supplied the number of
monthly rental." At the same time, Broadway customers which Tropical had inputted in its
stressed that "this concession" could no longer feasibility study. Whatever number Broadway
be extended "in its present form which may have submitted to Tropical in their pre-
continues to be a considerable reduction on the contract negotiations was no more than an
provisions of our existing long-term contract." estimate or speculation as to the number of
Finally, in his last letter of 15 April 1983, Mr. customers that might be coming into the then
Luis Que of Tropical appealed once more to proposed Tropical Supermarket at the
Broadway to continue the reduction in rental Broadway Centrum. We do not understand
under the 20 April 1982 letter-agreement "until Tropical to have suggested that that number
we have somehow recovered" and then, at the constituted a representation on the part of
same time, offered to increase that reduced Broadway which turned out to be false and
rental by adding to it 20% of Tropical's income which vitiated Tropical's consent to the original
from concessionaires at its Broadway Centrum 1980 Contract, of Lease. Neither do we
Supermarket. Turning down Mr. Que's last understand Tropical to be suggesting that
counter-officer, Mrs. Orosa of Broadway on 22 Broadway had warranted to Tropical that a
April 1983 once again stressed that: certain number of customers would in fact be
The temporary arrangement of reducing visiting the then proposed Tropical
your monthly rentals was extended as an Supermarket at Broadway Centrum. The 1980
assistance. This had caused us to lose Contract of Lease itself was totally silent as to
P620,000.00 on rental income. any such estimated or expected number of
(Emphasis supplied). customers either as a representation or as a
It is thus clear to the Court that Tropical was warranty on the part, of Broadway. That silence
attempting to modify its formal Lease Contract rendered any estimate which Broadway may 17
with Broadway by implying or inserting terms have conveyed to Tropical, quite immaterial.
into the 20 April 1982 letter-agreement which We turn to the holding of the Court of Appeals
are not found in that letter-agreement. Under that the surrender of 466.56 square meters of
both the Civil Code and our case law on leased space by Tropical to Broadway
novation and as well the express terms of the constituted valuable consideration, acceptance
28 November 1980 Contract of Lease, only of which disabled Broadway from insisting on
evidence of the clearest and most explicit kind the original terms of their Contract of Lease.
will suffice for that purpose. Tropical's theory Under the view we have taken above of the
that Broadway had agreed in the 20 April 1982 legal effects of the 20 April 1982 letter-
letter-agreement to maintain the reduced agreement, this supposed valuable
rental so long as Tropical was suffering from a consideration appears quite immaterial. We
"low volume of sales" appears to us as an must, nonetheless, note that comparison of the
afterthought, imaginative and original no lease rentals reduced and the floor space
doubt, but still an afterthought. Tropical did not surrendered yields a strong presumption that
pretend to have reached agreement with Broadway could not have agreed to the
Broadway on what level of sales would supposed partial novation. The rentals were
constitute the critical "low volume of sales." reduced by Broadway by 50% (from
And so, the trial court ended up with the truly P120,000.00 to P60,000.00 per month). The
extraordinary recourse of referring to the floor space was reduced by slightly over 15%
feasibility study that Tropical had made on it's only. No substantial relationship existed
own, before Tropical and Broadway executed between the amount of the reduction of rental
and the area of the space returned by Tropical. Bidin, Davide, Jr. and Melo, JJ., concur.
Hence, no reasonable presumption can be Romero, J., took no part.
indulged that that, return of part of the leased
space constituted consideration for the
reduction of rental rates. In that Contract of # Footnotes
Lease, moreover, the rentals were stipulated
1 Record, pp. 6-7.
for a specified portion of the Broadway
Centrum having a total floor area of 3,042.19 2 Record, p. 164.
square meters; the rental rate was not 3 TSN 19 July 1984, p. 5.
specified on a per square meter basis.
4 Exhibit "G" for respondent and
We conclude that the Court, of Appeals fell into Exhibit "5" for petitioner; Record,
reversible error when it affirmed the decision of p. 21.
the trial court. We believe and so hold that the
letter-agreement of 20 April 1982 did not 5 Record, p. 22.
constitute a novation, Whether partial or total, 6 Id., p. 39.
of the 28 November 1980 Contract of Lease
7 Id., p. 43.
between Broadway and Tropical.
8 Id., p. 44.
WHEREFORE, for all the foregoing, the Petition
for Review on Certiorari is hereby GIVEN DUE 9 Id., p. 45.
COURSE, and the Comment filed by private 10 Id., p. 46.
respondent Tropical is hereby TREATED as its
ANSWER and the Decision dated 30 January 11 Rollo, pp. 32-33.
1987 of the Court, of Appeals and the Decision 12 Young vs. Court of Appeal, 196
dated 14 March 1985 of the trial court are SCRA 795 (1991); Caneda vs.
hereby REVERSED and SET ASIDE. A new Court of Appeals, 181 SCRA 762
judgment is hereby entered dismissing the (1990); Conchingyan vs. R & B
complaint filed by private respondent Tropical, Surety and Insurance Co., 151
and requiring private respondent Tropical to SCRA 339 (1987); De Cortes vs.
pay to petitioner Broadway the following rental Venturanza, 79 SCRA 709 (1977).
rates:
13 Cachingyan. Jr. v. R & B Surety
1. P80,000.00 per month from 1 January 1983 and Insurance Company, Inc.,
up to 30 June 1983; supra.
2. P100,000.00 per, month from 1 July 1983 up 14 Article 1292, Civil Code.
to 31 January 1984; Zoponta v. Rotaeche, 31 Phil
3. P140,000.00 per month from 1 February 154.159 (1912).
1984 to 1 February 1987; and 15 See. e. g., Goni vs. Court of
4. P160,000.00 per month from 1 February appeals, 144 SCRA 222 (1986);
1987 to 31 January 1991. Landico vs. Pacquing, 42 SCRA
322 (1971); Asia Banking Corp. vs.
The penalty of 2% per month on unpaid rentals Lacson Co. Inc., 48 Phil 482
specified in Section 5 of the 28 November 1980 (1925); Tui Suico v. Jabana, 45
Contract of Lease is, in the exercise of the Phil. 707 (1924); Martinez vs.
Court's discretion, hereby equitably REDUCED Cavines 25 Phil 581 (1913).
to ten percent (10%) per annum computed
from accrual of such rentals as above specified 16 Record, pp. 17-18.
until fully paid. In addition, private respondent 17 Section 34 of the Lease
Tropical shall pay to petitioner Broadway Contract provided:
attorney's fees in the amount of ten percent
"This lease agreement renders
(10%) (and not twenty percent [20%] as
void any and all agreements and
specified in Section 33 of the Contract of lease)
understanding, oral and/or written
of the total amount due and payable to
previously entered into between
petitioner Broadway under this Decision. Costs
the parties hereto covering the
against, private respondent.
property herein leased; and this
SO ORDERED. agreement may not hereafter be
modified or altered except by
instrument in writing duly signed,
by the parties hereto." (Emphasis
supplied)

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